Claude's Book Review - March 2024

Winning on Purpose

The Unbeatable Strategy of Loving Customers

by Fred Reichheld

HBR Press, 2021. 225 pages

Winning on purpose, what a catchy title. But it was not the title that led me to buy and read this latest book by Fred Reichheld. Reichheld, a Senior Advisory Partner at Bain, is the inventor of the Net Promoter Score (NPS). I had heard of and had been confronted with the NPS many times. I wanted to learn more and understand the thinking behind measuring customer happiness when picking up this book.

Reichheld tells in this book the story behind the NPS. It is based on a combination of personal experiences with stories from users of the framework. To some extent, the observations are generalized to transform the concept of “happy customers” into a mindset that companies should follow. At the core of the MPs lies the golden rule it took me quite some time to understand that concept—and I’m still not sure I correctly get it. The golden rule is based on defining “love as a state of caring so much for a person that most of your happiness from the relationship derived from increasing that person’s happiness and well-being” (page 39) or summarized as “love thy neighbor as thyself. ”

Reichheld starts his storytelling with what he believes should be the primary purpose of a firm: enrich the lives of their customers. According to a Bain & Company survey, only 10 percent of business leaders agree with that belief. Most business leaders still believe that the primary purpose of business is profits. And the NPS should help change that. This led the author to believe that firms should focus on creating loyal customers, as only loyal customers feel loved. This means that firms need to start by defining their purpose.

The NPS is a qualification to what extent the customer is willing to recommend a firm and its products and services to another prospect. At first, this seems like a useful performance measure. But, from my perspective, it suffers from three major flaws: First, it is a one-dimensional performance measure. Second, it can easily be gamed. And third, it assumes (without proof) that a causal relationship exists between customer happiness, referral, and subsequent purchases.

Chapter 2 is devoted to introducing what the author calls customer capitalism—putting customer interest first—to achieve sustainable greatness. The author shows that firms that make their customers feel loved outperform and outgrow their competition. Unfortunately, the author fails to explain why this is so! In subsequent chapters, the author illustrates how firms succeed by implementing the NPS framework. Examples go from American Express, Costco, Chick-fil-A, Discover, and JP Morgan Chase, to PURE Insurance, to name just a few. All examples are US-centric, making me question if the NPS approach works elsewhere in the world, where different cultures exist.

In chapter 4, the author shows the role teams play in making customers happy. Chapter 5 is devoted to the role of investors in implementing customer capitalism. The key is moving towards a system of customer counting and earned growth.

At last, chapter 6 is devoted to understanding and honoring the golden rule, which forms the foundation of the NPS. I have read this chapter twice, but I still have difficulty grasping the essence of the golden rule beyond its cliché. But maybe that’s only me!

In chapter 7, the author argues that success depends on exceeding expectations, being remarkable, and not merely satisfactory. That sounds great, but on second thought, someone has to pay for that excess over expectations. If I order three apples and get four, I implicitly pay for that fourth apple, although I only want three. To me, that is inconsistent with happiness, at least my definition of happiness. The book’s last two chapters focus on the role of persistence and humility in succeeding in customer capitalism.

If you’re not yet thoroughly familiar with the NPS framework, and I believe you should be, I highly recommend reading this book. It’s well written and easy to read, although we could rely more on actual research results than anecdotal evidence. But, to me, a big part of the book fails to convince me that NPS is an appropriate framework to win in customer capitalism. On the contrary, I am confident that the NPS framework is fundamentally flawed because it assumes a nonexistent causality between customer happiness and subsequent purchases. At best, there exists a correlation between love and purchase.

As always, this is my personal subjective assessment of the book Winning on Purpose with which you may or may not agree. Any well-argued opinions, whether in agreement or not, are welcome!

? 2024 innovate.d llc

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