The Loyalty Effect

by Frederick F. Reichheld

Book Overview

In showing how loyalty-based management leads to the creation of value, this book reveals the secrets of Bain and Company's strategy for retaining loyal customers, employees and investors. It also demonstrates the economic effect of customer, shareholder and employee loyalty.

• Format: Hardcover
• Language: English
• ISBN: 0875844480
• ISBN13: 9780875844480
• Release Date: January 1996
• Publisher: Harvard Business Review Press
• Length: 323 Pages
• Weight: 1.58 lbs.
• Dimensions: 1.2" x 6.6" x 9.4"

Customer Reviews

Substantiating soft efforts for loyalty with hard figures

"Loyalty is dead" begins this classic about loyalty. But after you’ve read this book, you'll know that pursuing loyalty pays off. The authors show you many ways to measure the profit of loyalty. Not only is employee loyalty important but also the loyalty of customers and investors. The first step is to build up a set of values for your company. This core task can't be delegated; it must be done by CEOs themselves. Loyalty can't be managed; it must be earned. The book contains many examples of how large companies have done this. What I like most about this book are the hints for substantiating "soft" efforts for loyalty with "hard" figures. Most of the time the authors argue for a focus on the long term. Loyalty-based management is hard work. This is the right book to get you started.Peter Pick(...)

How to Achieve and Then Sustain Loyalty

I read this book when it was first published and recently re-read it. Those who have checked out my reviews of other books which address many of the same issues already know that I have a bias with regard to "customer satisfaction" and "customer loyalty", agreeing with Jeffrey Gitomer and others that the former is wholly dependent on each transaction and the latter can end (sometimes permanently) because of a single unsatisfactory transaction. The objective for those who have customers (be they internal or external) is to achieve and then sustain their passion about doing business with you. You want them to become evangelists.Of course, Reichheld fully understands all this. In a brilliant essay which recently appeared in the Harvard Business Review, he shares new research which (again) shows that companies with faithful employees, customers, and investors (i.e. capital sources which include banks) share one key attribute: leaders who stick with six "bedrock principles": preach what you practice (David Maister has much of value to say about this in his most recently published book, Practice What You Preach), play to win-win, be picky, keep it simple, reward the right results, and finally, listen hard...talk straight. In this book, Reichheld organizes his material within 11 chapters which range from "Loyalty and Value" to "Getting Started: The Path Toward Zero Defections." With meticulous care, he explains how to devise and them implement programs which will help any organization to earn the loyalty of everyone involved in the enterprise. He draws upon a wealth of real-world experience which he and his associates in Bain & Company, a worldwide strategy consulting firm. Reichheld heads up its Loyalty Practice. In his most recently published book, Practice What You Preach, David Maister explains why there must be no discrepancy whatsoever between the "talk" we talk and the "walk" we walk. Reichheld agrees, noting that the "key" to the success of his own organization "has been its loyalty to two principles: first, that our primary mission is to create value for our clients, and second, that our most precious asset is the employees dedicated to making productive contributions to client value creation. Whenever we've been perfectly centered on these two principles, our business has prospered." It is no coincidence that the world's most highly admired companies are also the most profitable within their respective industries. I wholly agree with Reichheld that loyalty is critically important as a measure of value creation and as a source of profit but that it is by no means "a cure-all or a magic bullet." Loyalty is based on trust and respect. It must be earned, usually over an extended period of time and yet can be lost or compromised at any time with a single betrayal. Here are three brief excerpts:"One common barrier to better loyalty and higher productivity is the fact that a lot of business executives, and virtually all accounting departments, trea

The most valuable business book I've ever read

Reichheld lays out both why loyalty matters, and why difficulty in measuring the impact of loyalty has made managers undervalue it in the past. He shows how loyal relationships with employees, suppliers, customers and investors all contribute to a company's long term success.His insights are profound for anyone building a company. We have used his insights to build our business, and have benefited enormously from the viewpoints expressed in this book.

How to Capture the Most Benefit from Your Business

This is an outstanding book for explaining and exploring the economic value of keeping a customer. In explaining those benefits, it becomes clearer how important and affordable it is to keep customers. Unlike most business books, which seem to be written by people who cannot use numbers, this one quantifies its points. It also shows you how to do the same for your business. As such, it is a very practical and important resource for every company. I strongly urge you to read and apply these lessons to your business. In many companies, getting new customers is seen as the solution to virtually every problem. However, a lot of times companies have to get new customers because they have disappointed the old ones. You are better off to find out why you are losing customers, and do something about it. Otherwise, you will just spend a fortune to add new customers who will soon leave you for the same reasons. This book also explains a well-known investing phenomenon, that companies with high loyalty rates are great stocks to own (like Coca-Cola, Gillette, and so forth). Did Warren Buffett know this all along? I should mention that I am a management consultant, but have no connection to the firm that wrote this book.

The most valuable business book I've read in years!!!

The Loyalty Effect takes a long, detailed look at the economics of loyalty, providing concrete examples to support the conclusion that the goal of a business must be the creation of sustainable value for customers employees and investors.Reichheld takes that which many of us hold as "intuitively correct" and adds substance to our intuition. By translating loyalty into the language of accounting and finance, for example, he proves over and over again, that loyalty is a pre-requisitie for proitability. He doesn't argue against profitability...he merely clarifies the order of priorities for management.I'm a former IBMer and I now run my own management consulting firm. Reichheld's firm is in fact a competitor, and yet I strongly recommend this book to any decision-maker who is interested in breaking through the fluff and securing real-world advice regarding specifc ways to sustain the health of any company.Rather than reading the "visionaries", the turnaround specialists and the various and assorted geniuses read this. Reichheld, offers a straightforward summary of empirical evidence that correlates high retention rates (of customers and employees) with long-term profitability. While many other authors seem to be pushing their own agendas (and egos), Reichheld is summarizing the collective experience of numerous companies around the world.Read this book. It will guide you to better business performance whether you're in marketing, finance, engineering, operations, HR or window-cleaning. If you're tired of losing customers and employees, this book may help save your butt! (if you're patient and willing to ask some difficult questions).