Loyalty Rules!: How Today's Leaders Build Lasting Relationship

A recent re-reading confirms my initial reactions to this book. In a brilliant essay which appeared in the Harvard Business Review, Reichheld shares research which suggests 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, play to win-win, be picky, keep it simple, reward the right results, and finally, listen hard...talk straight. In The Loyalty Effect, 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. Reichheld draws upon a wealth of real-world experience which he and his associates have accumulated at 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.In Loyalty Rules!, Reichheld develops these and other ideas (the foundation of what he calls an "economic framework") in much greater depth as he explains how today's leaders build lasting relationships beyond as well as within their organizations. "Loyalty cannot begin with tools; it must begin with leaders who recognize the enormous value of building and maintaining mutually beneficial relationships....Accordingly, this book spends at least as much time on the underlying objectives for building loyalty as it does on the how-to's." He organizes his material within eight chapters which range from "Timeless Principles" (previously introduced in The Loyalty Effect) to "Preach What You Practice" in which he asserts that actions speak louder than words and together, they are "unbeatable." One of this book's greatest benefits is provided in a series of "Action Checklists" which reiterate

Not long ago, loyalty was out of fashion. Tom Peters said, "Forget loyalty. Try loyalty to your Rolodex." The magazine Fast Company incited everyone to join the "free-agent nation." Now, loyalty is a hot topic. The person most responsible for this turnaround is Frederick Reichheld, who published the seminal work, "TheLoyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value," in 1996. Based on studies at Bain & Co., Reichheld determined that loyalty is the primary driver of profitability. The studies found that an increase in customer retention rates of just 5% increases profits by 25%-95%. The right customers, employees and investors who stay with a firm fuel a virtuous cycle of long-term growth that increases profitability,empowers the brand and cuts marketing costs. "Loyalty Rules!" picks up on the same themes addressed in "Loyalty Effect." It's impossible to generate superior long-term profits without superior customer loyalty. The right measurements and rewards are critical to achieving the right results. The book illustrates how loyalty has made such organizations as Harley-Davidson, Enterprise Rent-A-Car, The Vanguard Group, Southwest Airlines, Northwestern Mutual, Chick-fil-a, and others so successful. Such success, says Reichheld, results from the emphasis corporate leaders place on six loyalty principles:o play to win/wino be picky (membership is a privilege)o keep it simpleo reward the right resultso listen hardo talk straight, and preach what you practice The "Loyalty Effect" was a primer on how to build loyalty. Numerous charts, graphs and even formulas illustrated the cause-and-effect relationships between loyalty and value creation. While "Loyalty Effect" sought to teach and persuade, "Loyalty Rules!" aims to inspire. Organizations should always take the high road. Vanguard employees are "proud to be part of the most ethical organization in the industry." Reichheld approvingly quotes Cisco CEO John Chambers: "Never do anything to competitors that you wouldn't want them to do to you." He encourages leaders "to assume the pulpit and preach about the values at the core of your life and your relationships." Inspirational stories and advice are balanced by "action checklists" at the end of each chapter. These include specific tips to achieve loyalty, such as "create a golden rule for your firm," "make recruiting an executive priority," "create a customer experience council," and "turn call centers and help desks into strategic listening posts." Reichheld concludes with a "Loyalty Acid Test." These are sample questionnaires for customers and employees that can diagnose the health of relationships. Other excellent books on the same topic are Customer Equity: Building and Managing Relationships as Valuable Assets by Blattberg, Getz and Thomas. Also highly recommended is FusionBranding: How to Forge Your Brand for the Future by customer loyalty consultant Nick Wreden

In a brilliant essay which appeared in the Harvard Business Review, Reichheld shares research which suggests 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, play to win-win, be picky, keep it simple, reward the right results, and finally, listen hard...talk straight. In The Loyalty Effect, 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. Reichheld draws upon a wealth of real-world experience which he and his associates have accumulated at 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.In Loyalty Rules!, Reichheld develops these and other ideas (the foundation of what he calls an "economic framework") in much greater depth as he explains how today's leaders build lasting relationships beyond as well as within their organizations. "Loyalty cannot begin with tools; it must begin with leaders who recognize the enormous value of building and maintaining mutually beneficial relationships....Accordingly, this book spends at least as much time on the underlying objectives for building loyalty as it does on the how-to's." He organizes his material within eight chapters which range from "Timeless Principles" (previously introduced in The Loyalty Effect) to "Preach What You Practice" in which he asserts that actions speak louder than words and together, they are "unbeatable." One of this book's greatest benefits is provided in a series of "Action Checklists" which reiterate key ideas while suggesting specific initiatives to implement the

In these Internet times, the next store is only a click away. Fewer workers regard their employer to be worthy of loyalty. So is loyalty still of interest? After writing his 1996 classic about loyalty, The Loyalty Effect, Frederick F. Reichheld continues his praise for values and a long-term focus. He demonstrates that business on the Web is based mostly on trust, not on prices. Many examples from successful organizations show how to establish loyalty and how it pays off. You’ll see that employee loyalty is very important for company success, and the author shows ways to earn this loyalty. This book contains many checklists for immediate action plans. And it includes sample questionnaires for checking your employees’ and customers’ loyalty toward your company.Peter Pick(...)

Most sequels to business books merely add some more detail to the argument of the previous book. Loyalty Rules! is a happy exception to that circumstance. The Loyalty Effect is a fine and helpful book, but I prefer Loyalty Rules! because it is more practical and explores so many more dimensions of leadership and management. There is also new information in Loyalty Rules! about the economics of customer loyalty for doing business on the Internet.Many people take the financial incentive to keep customers longer as encouragement to employ all of the latest loyalty-building tools (from data-mining to loyalty incentive programs). Mr. Reichheld is correct that encouraging people to be loyal while treating them with bad service, poor products, or disloyalty in return will not work. He argues instead for a values-based orientation that will remind many people of the principles in The 7 Habits of Highly Effective People.The essence of the concept for creating loyalty is: "Show your partners [stakeholders like customers and employees] that loyalty is a logical strategy for the pursuit of self-interest when self-interest is defined in the context of lifelong success."His six principles for building loyalty are paraphrased as follows:(1) Always play to provide wins for the stakeholder as well as for the company.(2) Be selective about the employees and customers you take on and encourage to stay with you, so that they enhance your cooperative system.(3) Keep your approach to being loyal (and earning loyalty in return) simple. For example, "Do right by the customer" was an actionable motto for Intuit when bugs cropped up in its tax software.(4) Reward providing the right results (which usually means adjusting the way your compensate and motivate people in your organization).(5) Listen, learn, act, and explain (communication is a two-way street if you are to improve and be reponsive).(6) Begin with how you want to be remembered when you decide what to say and do today, and then preach with your words and actions to support that end.The book has fairly well developed examples from Enterprise Rent-A-Car, Vanguard Group, Harley-Davidson, Cisco Systems, Dell, Northwestern Mutual, MBNA, Chick-Fil-A, USAA, the New York Times, the U.S. Marines, and Intuit. There are also references to companies like ServiceMaster, Southwest Airlines, SAS (the computer software company) and other service organizations. The book and the book's web site contain loyalty questionnaires you can use to diagnose how your organization is doing. At the end of chapters 3-8 are directions for how to use the answers you get to direct your next steps.One big surprise in the book is that it emphasizes the dual idea of having an economic advantage and then using some of the economic benefits of that advantage over competitors to provide better results in ways that will build loyalty. The concept is that you turn a temporary economic advantage into a permanent one by building loyalty. You are directed