Companies currently spend billions of dollars each year measuring and managing metrics like customer satisfaction and Net Promoter Score (NPS) to improve customer loyalty. These metrics, however, have almost no correlation to share of wallet. As a result, the returns on investments designed to improve the customer experience are frequently near zero, even negative.
By applying the Wallet Allocation Rule, managers get real insight into the money they currently get from their customers, the money available to be earned by them, and what it takes to get it. The Wallet Allocation Rule provides managers with a blueprint for sustainable long-term growth.
TIMOTHY KEININGHAM is Global Chief Strategy Officer at Ipsos Loyalty, a professional services firm dedicated exclusively to customer experience, satisfaction, and loyalty.
LERZAN AKSOY is Professor of Marketing at Fordham University Schools of Business.
LUKE WILLIAMS is Vice President at Ipsos Loyalty, where he leads the day-to-day activity of large-scale research engagements.
ALEXANDER BUOYE is Assistant Professor of Marketing at Fordham University Schools of Business.
What is the Wallet Allocation Rule?
The Wallet Allocation Rule is a breakthrough approach for growing share—backed by rock-solid science. Growth is the common goal of every CEO. Sustainable growth begins with understanding customers’ needs and wants so well that your firm becomes customers’ first choice. Most leaders recognize this fact. That is why companies have devoted time and money to improving the customer experience.
Unfortunately, there is one overwhelming problem. The metrics managers use to measure and manage the customer experience—such as customer satisfaction and Net Promoter Score—don’t link to what matters most: share of wallet (i.e., the percentage of spending in a category that customers give to a brand). Without this linkage, it is virtually impossible to make efforts to improve the customer experience pay off. As a result, the returns on investments from these efforts is frequently trivial, even negative.
With the Wallet Allocation Rule, managers finally have the missing link within their grasp: the ability to link their current metrics to the spending customers allocate to their brands.
What’s Inside the Book
Chapter 1: It’s “Oh My God!” Bad
Customer satisfaction is the most widely used metric for measuring and managing customer loyalty. But our research finds that satisfaction does not link to what counts most: market share and share of wallet. Satisfaction is a strong negative predictor of market share. And satisfaction typically explains a miniscule 1% of customers’ share of spending in an industry category. This problem isn’t just limited to customer satisfaction. All commonly used measures of customer loyalty—such as the Net Promoter Score (NPS) or Recommend Intention—perform equally badly.
Chapter 2: Eureka! The Discovery of the Wallet Allocation Rule
Satisfied customers who recommend your brand are important. But all too often customers like your competitors just as much as they like your brand. The end result is that you are losing sales.
To understand what drives share of wallet and ultimately market share, managers need to shift their focus from the drivers of satisfaction or NPS to the drivers of rank. Our research conclusively proves that the rank that customers assign to a brand relative to other brands they use predicts share of wallet using a simple, previously unknown formula, which we’ve named The Wallet Allocation Rule.
Chapter 3: The Wallet Allocation Rule in Action
The drivers of share of wallet are almost always very different from the drivers of satisfaction or NPS. Wallet Allocation Rule analysis gets to the heart of what drives wallet share by identifying what drives a customers’ preference for your brand vis-à-vis competition instead of simply determining what makes customers happy.
Chapter 4: Customers as Assets
Growth is easy for firms willing to give their products away—for as long as they remain in business! But the first duty of a business to is to survive. Managers must never lose sight of the fact that the end goal is profits, not just revenues.
Chapter 5: New Metrics That Matter for Growth
The Wallet Allocation Rule makes it possible for managers 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 levels, firms need to add new metrics to their list of Key Performance Indicators (KPIs).
Chapter 6: Making It Happen
Rather than end this book with a cheerleader’s call to “Go, Fight, Win!” we instead want to focus on this all too important fact. Without proper execution, good ideas can and often do fail. The Wallet Allocation Rule is no exception. We end by identifying the most common failure points, and what you can do to avoid them.
To See How The Wallet Allocation Works Visit http://www.walletrule.com/war#js-how-it-works