Why the customer remains the king

If you think the adage "the customer is always right" is a no-brainer, you may be surprised to know how many businesses have not learned that lesson and how seriously not doing so damages their long-term profitability.

Rob Markey, a partner with the consulting firm Bain & Co, believes breeding customer loyalty is the best way to create a market-leading business and he has defined a methodology for doing so, which he calls the net promoter system.

Markey now aims to bring the system to China with his book The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World, which has just been published in Chinese.

"Whether you are selling planes, engines or toys, whatever business you are in, the ultimate question that defines the future of the company relies on your customers' answers to one question: 'How likely are you to recommend us to your friends and colleagues?'" Markey said during a forum with 300 Chinese business leaders at a Peking University Executive MBA class recently.

This simple question forms the core of the net promoter system, a management approach to business that eschews "bad profits" that exploit customers and favors ethical profits from enriching lives, a practice Markey says many international companies such as British Gas Services and American Express exemplify.

Markey, head of the global customer strategy and marketing practice at Bain & Co, has worked in this field for 23 years and spent a lot of that time observing how companies treat customers.

"I've wondered for some time why some companies' employees are angry with customers and yell at them, while those of other companies make great efforts to serve them," he says.

"Customer-centricity" is the path to growth because it drives customer loyalty, helping make a company mission-driven as well as profit-driven, Markey says. Bain & Co found that the "loyalty effect" typically boosts profits by between 25 and 100 percent by increasing customer retention rates by about 5 percent.

This is "because loyal customers come back more often, buy additional products and services, refer their friends, provide valuable feedback, cost less to serve and are less price sensitive".

As simple as it may sound, many companies fail to focus on customers because they are too fixated with accounting figures, which do not completely reflect the long-term situation of a company, Markey says.

"From the accounting and financial system, managers can see the company's income, cost and the production line situation, but many don't have measuring tools to tell them what economic values different kinds of customers could bring."

An important question companies should ask to get an accurate picture of its long-term prospects is: "How likely are you to recommend us to your friends and colleagues?"

Under his net promoter system this question is answered on a scale of zero to 10, with respondents then divided into promoters (a score of nine to 10; loyal enthusiasts who will keep buying and refer others, fuelling growth); passives (a score of seven to eight; satisfied but unenthusiastic; vulnerable to competitive offerings); detractors (a score of zero to six; unhappy customers who can damage your brand and impede growth through negative word of mouth).