Maybe customer love isn’t everything it’s cracked up to be.

That’s certainly what many people might be thinking as they witnessed First Republic – a customer experience darling of the banking industry – get seized by regulators and sold off to JPMorgan Chase in a rescue deal.

Customers loved First Republic. The bank’s Net Promoter^® Score (a widely-used measure of the quality of a company’s customer experience) hit a record high of 80 last year – far eclipsing the banking industry average of 31. With the Net Promoter scale maxing out at 100, that’s rarified air for any company, let alone a financial institution. Indeed, First Republic’s exceptional Net Promoter scores positioned it squarely in the pantheon of legendary, loyalty-leading firms such as Apple, Amazon, and Ritz-Carlton.

Even Fred Reichheld (creator of Net Promoter and widely regarded as the “Godfather of Loyalty”) has touted First Republic as a model of customer-centricity. Reichheld wrote extensively about the bank in his latest book, and was so inspired by First Republic’s approach to quantifying customer loyalty that he actually based his next-generation loyalty metric (“Earned Growth Rate”) on it.

If First Republic failed despite having legions of delighted customers, it would seem to call into question the strategic value of a great customer experience (CX). Have all the management gurus and CX experts misled us? Were the CX skeptics right all along?

Not quite. While the keynotes, articles, and podcasts that extolled First Republic might not age particularly well, the fact of the matter is – nothing about the bank’s failure challenges the merits of customer experience differentiation.

Rather, what First Republic’s demise signals is that a great customer experience is a necessary but not sufficient component for fueling business success. If customer experience gurus deserve any criticism, it is perhaps that they’ve not sufficiently stressed this point, instead framing customer experience as an absolute good (“Take care of your customers, and the business will take care of itself”).

True customer loyalty absolutely puts wind in a company’s sails. (True loyalty meaning that which is genuinely earned, rather than “bought” through reward programs, or bred by the absence of substitute offerings). But no matter how strong that loyalty lift is, there are a host of management missteps that can still steer a company off course. That’s exactly what happened at First Republic, because at its heart, this is a story about a failure in risk management:

The evidence supporting the business value of a great customer experience is broad and compelling – from boosting shareholder returns (Watermark Consulting, 2021), to raising revenues (Bain & Company, 2015), to reducing expenses (MIT Sloan Management Review, 2020). None of that evidence is undermined by First Republic’s failure.

Rather, the key lesson from this beloved bank’s collapse is simply this: There are basic elements of business management that, if not capably executed, can derail the prospects of companies with even the most revered customer experiences.

Because when it comes to driving long-term business success, customer love is a great thing. It’s just not the only thing.

Jon Picoult is the author of FROM IMPRESSED TO OBSESSED: 12 Principles for Turning Customers and Employees into Lifelong Fans. Sign up for his monthly Customer Experience & Leadership eNewsletter here.

Net Promoter and NPS are registered trademarks of Bain & Company, Inc., NICE Systems, Inc., and Fred Reichheld.