Blowing the Whistle on Bad Profits

Too many companies can't tell the difference between good profits and bad. The consequences are disastrous. Bad profits choke off a company's best opportunities for true, lasting growth. They blacken its reputation and make it vulnerable to competitors.

By "bad profits" we mean profits earned

at the expense of customer relationships. Whenever a customer feels mistreated, those profits are bad. Bad profits come from unfair or misleading pricing, saving money by delivering a poor customer experience, or extracting value from customers rather than creating value. At many firms, more than 30% of customers fall under the category of bad profits.

Good profits are dramatically different. A company earns good profits when it so delights its customers that they not only willingly come back for more, but they also tell others to do business with the company. Satisfied customers become, in effect, part of the company's marketing department. They become promoters.

A simple technique can help you distinguish good profits from bad. Ask your customers to answer what we call "the ultimate question": On a scale from zero to 10, how likely is it that you would recommend this company to a friend or a colleague? The responses will help you tally a metric known as Net Promoter? Score (NPSSM). NPS has been shown to correlate well not only with customer referrals and repurchases, but also with companies' growth rates.