Customer Loyalty Isn't Enough—Grow Your Share ofWallet
The Wallet Allocation Rule is a revolutionary, definitiveguide for winning the battle for share of customers' hearts, minds,and wallets. Backed by rock-solid science published in theHarvard Business Review and MIT Sloan ManagementReview, this landmark book introduces a new and rigorouslytested approach—the Wallet Allocation Rule—that isproven to link to the most important measure of customer loyalty:share of wallet.
Companies currently spend billions of dollars each yearmeasuring and managing metrics like customer satisfaction and NetPromoter Score (NPS) to improve customer loyalty. These metrics,however, have almost no correlation to share of wallet. As aresult, the returns on investments designed to improve the customerexperience are frequently near zero, even negative.
With The Wallet Allocation Rule, managers finally havethe missing link to business growth within their grasp—theability to link their existing metrics to the share of spendingthat customers allocate to their brands.
- Learn why improving satisfaction (or NPS) does not improveshare.
- Apply the Wallet Allocation Rule to discover what really drivescustomer spending.
- Uncover new metrics that really matter to achieve growth.
By applying the Wallet Allocation Rule, managers get realinsight into the money they currently get from their customers, themoney available to be earned by them, and what it takes to get it.The Wallet Allocation Rule provides managers with ablueprint for sustainable long-term growth.
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About the Author
TIMOTHY KEININGHAM is Global Chief Strategy Officer atIpsos Loyalty, a professional services firm dedicated exclusivelyto customer experience, satisfaction, and loyalty.
LERZAN AKSOY is Professor of Marketing at FordhamUniversity Schools of Business.
LUKE WILLIAMS is Vice President at Ipsos Loyalty, wherehe leads the day-to-day activity of large-scale researchengagements.
ALEXANDER BUOYE is Assistant Professor of Marketing atFordham University Schools of Business.
Table of Contents
It’s “Oh My God!” Bad 1
Key Takeaway: Customer satisfaction is the most widely usedmetric for measuring and managing customer loyalty. But ourresearch finds that satisfaction does not link to what counts most:market share and share of wallet. Satisfaction is a strong negativepredictor of market share. And satisfaction typically explains aminiscule 1 percent of customers’ share of spending in anindustry category. This problem isn’t just limited tocustomer satisfaction. All commonly used measures of customerloyalty—such as the Net Promoter Score (NPS) or recommendintention perform equally badly. This contradicts the message ofvirtually all programs discussed in the business press regardingthe relationship of satisfaction and NPS to business performance.The grim reality is that most of these efforts are doomed to fail.Moreover, they often run counter to a firm’s competitivepositioning and strategy.
Growth Is Hard to Find 3
Deconstructing Market Share 4
Different Metric, Same Outcome 8
Satisfaction ≠ Market Share 11
Satisfaction ≠ Share of Wallet 15
Always Wrong on Average 18
A Cautionary Tale 22
The Moral of the Story? 25
Eureka! The Discovery of the Wallet Allocation Rule27
Key Takeaway: Satisfied customers who recommend your brand areimportant. But all too often customers like your competitors justas much as they like your brand. The end result is that you arelosing sales. To understand what drives share of wallet andultimately market share, managers need to shift their focus fromthe drivers of satisfaction or NPS to the drivers of rank. Ourresearch conclusively proves that the rank that customers assign toa brand relative to other brands they use predicts share of walletusing a simple, previously unknown formula, which we’ve namedthe Wallet Allocation Rule.
Getting There 29
Determining Your Rank 32
The Wallet Allocation Rule and Share: The Evidence 33
The “Best” Metric? 38
Why Does the Wallet Allocation Rule Work? 40
Using the Wallet Allocation Rule 41
Wallet Allocation Rule Strategy 43
How to Improve Your Rank 46
The Rule in Practice 47
The Wallet Allocation Rule in Action 51
Key Takeaway: The drivers of share of wallet are almost alwaysvery different from the drivers of satisfaction or NPS. WalletAllocation Rule analysis gets to the heart of what drives walletshare by identifying what drives customers’ preference foryour brand vis-à-vis competition instead of simply determiningwhat makes customers happy.
Grinding a New Set of Lenses 52
Putting the Wallet Allocation Rule to Work 53
Customers as Assets 89
Key Takeaway: Growth is easy for firms willing to give theirproducts away—for as long as they remain in business! But thefirst duty of a business is to survive. Managers must never losesight of the fact that the end goal is profits, not justrevenues.
The Wallet Allocation Rule Is Not a Panacea 91
Revenue ≠ Profits 98
Short-Term Gain, Long-Term Pain 99
Money-Losing Delighters 102
Aligning Satisfaction, Share of Wallet, Revenue, and Profit104
New Metrics That Matter for Growth 109
Key Takeaway: The Wallet Allocation Rule makes it possible formanagers to easily link customer satisfaction to share of wallet.But because the rule is based upon a company’s relative rank,not its absolute satisfaction level, firms need to add new metricsto their list of Key Performance Indicators (KPIs).
Glass Houses and Stones 110
Must-Have Marketing Metrics 112
Customer Satisfaction 115
Key Drivers and Market Barriers 121
Demand Evidence 127
Making It Happen 129
Key Takeaway: Rather than end this book with acheerleader’s call to “Go, Fight, Win!” weinstead want to focus on this all too important fact: Withoutproper execution, good ideas can and often do fail. The WalletAllocation Rule is no exception. We end by identifying the mostcommon failure points, and what you can do to avoid them.
Rule 1: Get the Data Right 131
Rule 2: Set the Right Performance Standards 135
The Next Disruption 136
What’s Next? 139
Establish That You Need It 139
Get Help 139
Let’s Talk 140
Connect with Us 140
Visit www.walletrule.com 140
Quick Start Guide 141
What Is the Wallet Allocation Rule? 141
Wallet Allocation Rule Strategy 143
Identifying Opportunities for Improving Share of Wallet 146
An Example in the Credit Union Industry 147
Frequently Asked Questions 151
When Is It Appropriate to Use the Wallet Allocation Rule51
Does the Wallet Allocation Rule Work with All SatisfactionMetrics? 152
Is There a Preferred Metric We Should Use to Determine aBrand’s Rank? 153
How Do I Ensure That All Relevant Competitors Are Ranked54
What Metrics Should Be on My “Dashboard” Related tothe Wallet Allocation Rule? 154
Why Does the Wallet Allocation Rule Work? 155
Will Relative Net Promoter Score Work? 155
Isn’t Share of Wallet Just a Function of a Brand’sReach (i.e., Penetration)? 156
Visit www.walletrule.com 157
Principal Contributors 159
About the Authors 187
Timothy Keiningham, PhD 187
Lerzan Aksoy, PhD 188
Luke Williams 189
Alexander Buoye, PhD 189