I have recently read two similar business books. They are similar in that they both discuss formulas that can be implemented in an organization to measure profitability and business success. However, one formula is very simple while the other is more complex (at least IMHO). Let’s see if you can guess which is which:
The Ultimate Question, by Fred Reichheld
According to Reichheld, the “ultimate question” you should ask your customers is: “How likely are you to recommend us to a friend or colleague”? This question is based on a 0 to 10 scale.
Your customers are then divided into three categories based on the number they chose. Those who answered 9 or 10 are categorized as Promoters (enthusiastic evangelists), those that answer 7 or 8 are categorized as Passives (satisfied but bored customers), while those that answered 0 through 6 are categorized as Detractors (unhappy customers). Using these categories, you can derive your Net Promoter Score by using the following formula:
% of Promoters (P) minus % of Detractors (D) equals Net Promoter Score (NPS)
in other words:
P – D = NPS
Return on Customer, by Don Peppers and Martha Rogers
Peppers and Rogers explain the proper balance between current profit and long-term value. Both short-term and long-term value comes from the only business asset that ultimately matters: customers.
According to Peppers and Rogers, a customer can create value for a business in two ways: by increasing the company’s current-period cash flows, and by increasing its future cash flows. Maximizing Return On Customer (ROC) optimizes the mix of both current-period and future profits, to create the most enterprise value possible, as quickly as possible.
The formula for Return On Customer (ROC) is:
A firm’s current-period cash flow from its customers plus any changes in the underlying customer equity, divided by the total customer equity at the beginning of the period.
in other words:
Which formula do you think would be easier to spread? (hint: I had to cut and paste one formula instead of simply typing it because of the math symbols). I am not saying that one formula is better than another (actually, I think both are very valuable). What I am saying is that the less friction a message has, the greater chance it has of being spread by word of mouth (given that the messages are of equal greatness).
Whether your message is a business formula, a movie plot, or political platform, “friction” can be caused by complexity, being commonplace, or the fact that your product or service must actually be experienced to be enjoyed. Regardless of the reason, friction causes your message to grind to a halt. If you make your message as frictionless as possible, you’re well on you way to spreading your message.