Bad profits

Can profits be bad? Many CFOs with a traditional mindset would say 'definitely not. All profits are good profits.'. In an unconnected world that might be true. In a hyper-connected world, bad profits can be very, very bad for your company.

So, what is it really? Simple. Bad profits are profits that make customers irritated and incensed. Impenetrable bills. 'Administration' fees, or other bogus extras. Bureaucratic rebate programs. The habit of hiding behind small print when a customer have a complaint.

Fred Reichheld, author of a new book called "The Ultimate Question: Driving Good Profits for True Growth" says in a ClickZ article;

"Bad profits choke off a company's best opportunities for growth, the kind of growth that is both profitable and sustainable. They blacken its reputation. The pursuit of bad profits alienates customers and demoralizes employees. They can also make a business vulnerable to competitors."

In the hyper-connected world we're now venturing into, bad reputation spread like wildfire through blogs, web groups like YahooGroups, niched forums and consumer sites such as epinions and PlanetFeedback.

Reichheld has one ultimate question, which most brands ignore: "How likely is it that you would recommend this company to a friend or colleague?" The answer can lead to an accountability framework and scorecard for companies to measure progress and results. Seventy percent of eBay customers, for example, are "promoters," a score well reflected in the company's financial performance.

It doesn't have to be difficult nor expensive to measure referal value. The ClickZ article Are You Asking the Ultimate Marketing Question? suggests the following;

Rescript the call center.

How many call center experiences have ended with the question, "Based on this experience, would you be likely to tell others about us?" Very few, but that should change. Low incremental cost, high value. Do it now!

Tweak the feedback form.

Ninety-nine percent of company Web feedback forms are not only cumbersome and unfriendly (and practically push consumers to complaint sites), but they fail to collect the right data. Why not just add the ultimate question? Also, consider adding fields that help better gauge depth of virality, ownership of blogs, or activity. Remember, consumer affairs is the new marketing sweet spot.

Tweak the brand-tracking survey.

Brands spend a fortune on research, and it continues to astonish me how few of them include any measures related to referral value. I've filled out a dozen automotive surveys, many of them multiple pages, and I've still never been asked -- not even once -- whether I have a blog. Hello!

Harvest and organize consumer-generated media (CGM).

Even without solicited research, you can exploit unaided CGM on message boards, forums, blogs, and rating/review sites to assess the propensity to ascertain whether consumers recommend, promote, or even terrorize your brand. Brands like McDonald's and Cingular have tens of millions of consumer comments online. Nearly half of online consumers now create content. Make no mistake -- there's lots of CGM inventory to work with!

To be pro-active might reap great rewards. Sonos, makers of a digital music system, has an internal team that monitors blogs for customers that report their experiences. If a blog posts a personal review of the product and there is a problem that needs to be fixed, Sonos will post the fix on the comment section of the blog.

In a Forbes article, Tapping Into The Blogosphere, Tom Cullen, co-founder of Sonos says;

"Our customer support department doesn't just wait for a phone call or an e-mail to provide assistance. We believe strongly in word-of-mouth as a key driver to our business."

For a traditional company, this might be a bit hard to understand - and certainly to implement. But read this funny mock conversation, and the fogs might clear a bit; Companies Should Empower Bloggers to Reach Their Goals.