Moreover, because of superior loyalty, company A's customers are more profitable. The net result is that company A outperforms company B on most measure. Accordingly, Reichheld advises executives to seek customers who are likely to become loyal and avoid customers who are not. This requires studying their loyal and disloyal customers to understand where they come from and how they were attracted to the company, and then purposefully doing more of what produces loyal customers and less of what does not. Needless to say, the company now discourages its agents from placing such ads.
Profitability improves dramatically when a company cuts turnover.
Reichheld cites a trucking company that boosted profits 50 percent by cutting driver turnover in half. Similarly, a stock brokerage increased the economic value of its brokers 155 percent by reducing turnover from 20 to 10 percent. Another example is State Farm Insurance which takes extreme care in hiring new agents. Their training includes two or three years as employees before they're eligible to become agents. As agents they are responsible for all aspects of running their agency and do so with little interference from headquarters.