In the eyes of author Frederick
Reichheld, loyalty is at the heart of every company that
boasts high productivity, solid profits and sustained growth.
Learning how to build loyalty and equally important, how to
sustain it, is the ultimate message in this book. Loyalty
Rules provides entertaining and detailed insight into each
of the six principles of loyalty, which provide the foundation
upon which loyalty is built.
Six Loyalty Principles
1. Play to win/win
2. Be picky
3. Keep
it simple
4. Reward the right results
5. Listen
hard, talk straight
6. Preach what you
practice
Play to Win/Win
Profit at the expense of
partners is a shortcut to a dead end. A win/win strategy
ensures both parties benefit from the relationship. Loyalty is
what makes customers enthusiastic about a relationship with
your company, because they know it will improve their lives
over the long term. Partners similarly will commit to building
your success because they know you will build theirs. This
kind of loyalty is not about good intentions. It requires a
rational strategy for creating superior economics. To do this,
however, you must be prepared to play only where you both can
win:
·
Get rid of distractions - divest every business
line that is delivering less than the best customer value.
·
Beware of the rotting core - distractions are not
always found in newer business lines. It may be what was
traditionally your core business which is delivering poor
value.
·
Be wary of wall street wisdom - investor advice
on how to achieve success can become a lethal distraction.
·
Grow from positions of strength - the best source
of growth is through deepening relationships with existing
customers rather than spreading resources too thinly.
Be Picky
Who you associate with is the strongest
indication of your values and aspirations. Choose your
partners, suppliers, associates, and managers carefully. Not
all are worthy to work with or represent your company, in
terms of character, capability and performance.
Selecting the right employees should be one of your most
important concerns in running your enterprise. Employee
behaviors and attitude communicate most directly what your
company stands for.
·
Don't delegate employee selection more than
absolutely necessary.
· Be picky about employees' initial
experience: the first 40 hours of work makes an indelible
imprint on a new employee and frames their understanding of
the company and its business.
· Be picky about who
stays and who is promoted: high performance cultures cannot
tolerate mediocrity.
Target the right customers. Undisciplined customer
acquisition can lead to higher costs and may jeopardize your
reputation. Picking the right customers on the other hand
means greater selectivity and more focused marketing. Look for
barnacles, not butterflies. Target those who will provide you
with ongoing income and greater profits rather than numerous
short-term and often more costly customers that chase the
latest gimmick or discount deal.
Keep it Simple
Complexity is the enemy of speed
and responsiveness. The best business is so reliable and so
flexible that it does the best possible job in the fastest and
simplest way.
·
Simple rules are golden: keep your principles
simple and clear and easy to remember.
· Treat them right: your
customers will be loyal if you treat them ethically and
responsibly.
·
Keep score keeping stable and simple. Manage
performance using a simple, clear set of rules that don't
change with the latest management fad. This is a powerful
tool for keeping people focused on creating value.
· Small
flexible teams. Create small teams that work together to
solve problems. The small size will naturally build the
loyalty and familiarity found in small towns.
· Teams of ten
or fewer are the most effective. Don't increase the span of
control for supervisors: productivity will fall.
· Outsource
all functions for which you cannot deliver unique
value.
Reward the Right Results
Worthy partners
deserve worthy goals. Most reward systems reinforce the wrong
behaviours. Often the results that are easiest to measure are
not the right results to reward. Loyalty is not generated by
reasonable performance: it is generated by overachievement.
This requires outstanding teamwork by partners who trust one
another's commitment to win/win results.
·
Measure retention - carefully. This is the best
gauge of whether your company is delivering value to your
customers.
·
Build a better dashboard. Augment standard
accounting metrics with gauges that measure the creation of
partner and customer value.
· Align incentives. Once
you have the right dashboard, you must align incentives to
correctly influence behavior.
· Fix misalignment.
Employee interest must not conflict with customer interest.
Investigate and correct misalignment.
· Reach for the stars.
Eliminate floors on performance and remove ceilings. Pay
rewards according to real profits generated.
· Reward loyal
customers. The partners that create the most value should
receive the most benefits.
Listen Hard, Talk Straight
Long term
relationships require honest, two-way communication and
learning. Loyalty leaders tell their partners what they want
even if they don't want to hear it. If you want to build a
community of enduring relationships, you must help everyone
become effective communicators:
·
Listen.
· Learn, rather than focusing on
responding.
·
Act, once you have learned the issue.
· Explain what
you are doing AND why.
Preach What You Practice
Actions speak louder
than words, but together they are unbeatable. You can't go
quietly about your business and assume your results will speak
for themselves. Unless you preach loyalty's wisdom with power,
clarity and conviction, your actions will be ignored or
discounted.
