Home > Good versus Bad Profits
When it comes to profit, your Promoters are generating Good Profit for your business. They continue to make purchases, increase their annual spend, and also promote and grow your business with their enthusiastic referrals to friends and colleagues.
Bad Profits occur when a company tries to boost profits by taking away from their customers. Tricks such as maintaining your price but cutting back on the level of service, or raising prices without increasing service levels, cause short-term profit gains, but inevitably lead to unsatisfied customers who are no longer loyal. They become Detractors.
If a company focuses on bad profits, long-term financial growth and stability will not be achieved.
“Bad profits work much of their damage through the detractors they create. Detractors are customers who feel badly treated by a company. And they’re expensive. They buy less. They demoralize front-line employees with complaints and demands. They gripe to friends, relatives, colleagues, acquaintances. Estimates vary, but for a long time, the accepted maxim was that every unhappy customer told 10 friends.
No wonder bad profits strangle a company’s growth. If many of your customers are bad-mouthing you, how are you going to get more? If your customers feel mistreated, how will you persuade them to buy more from you? Right now, churn rates in some industries have deteriorated to the point where a company may lose half of its new customers in less than three years.
Customers resent bad profits—but CEOs and investors should, too, because bad profits undermine a company’s prospects. Like the addicts they are, enterprises dependent on bad profits have no future until they can break their habit.”
Fred Reichheld | October 24, 2012 | NPS Loyalty Blog