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Frank Friend's Blog

Good vs bad profits

Frank Friend - Wednesday, April 06, 2011

Do you know the difference?

If you don’t you could have big problems.

Bad profits are profits earned at the expense of customer relationships, usually by sacrificing long term growth for short term profits. They come from saving money by reducing customer service, by adding unjustified costs and reducing rather than creating value for the customer.   

Good profits are earned by building strong customer relationships, by adding value and so delighting customers that they willingly return and refer others to your company.

Bad profits are generated by Detractor customers – they don’t like you! They will leave as soon they can and take every opportunity to bad mouth your company. Good profits come from your Promoters (loyal customers).

You must distinguish good profits from bad and identify which customers are responsible for them so that you can take action. There is a simple survey technique to help you do this. It’s called the Net Promoter Score (NPS), it involves asking customers one question to reveal which customers are Promoters, Passive or Detractors. For a discussion of NPS go to my website, “Customer Loyalty” tab

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