Wallet Allocation Rule

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.

• Preface xviiForeword xixChapter 1It’s “Oh My God!” Bad 1Key Takeaway: 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 percent 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. This contradicts the message of virtually all programs discussed in the business press regarding the 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 competitive positioning and strategy.Growth Is Hard to Find 3Deconstructing Market Share 4Different Metric, Same Outcome 8Satisfaction ≠ Market Share 11Satisfaction ≠ Share of Wallet 15Always Wrong on Average 18A Cautionary Tale 22The Moral of the Story? 25Chapter 2Eureka! The Discovery of the Wallet Allocation Rule 27Key Takeaway: 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.Getting There 29Determining Your Rank 32The Wallet Allocation Rule and Share: The Evidence 33The “Best” Metric? 38Why Does the Wallet Allocation Rule Work? 40Using the Wallet Allocation Rule 41Wallet Allocation Rule Strategy 43How to Improve Your Rank 46The Rule in Practice 47Conclusion 49Chapter 3The Wallet Allocation Rule in Action 51Key Takeaway: 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 customers’ preference for your brand vis-à-vis competition instead of simply determining what makes customers happy.Grinding a New Set of Lenses 52Putting the Wallet Allocation Rule to Work 53Conclusion 88Chapter 4Customers as Assets 89Key Takeaway: 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 is to survive. Managers must never lose sight of the fact that the end goal is profits, not just revenues.The Wallet Allocation Rule Is Not a Panacea 91Revenue ≠ Profits 98Short-Term Gain, Long-Term Pain 99Money-Losing Delighters 102Aligning Satisfaction, Share of Wallet, Revenue, and Profit 104Conclusion 106Chapter 5New Metrics That Matter for Growth 109Key Takeaway: 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 level, firms need to add new metrics to their list of Key Performance Indicators (KPIs).Glass Houses and Stones 110Must-Have Marketing Metrics 112Customer Satisfaction 115Key Drivers and Market Barriers 121Demand Evidence 127Chapter 6Making It Happen 129Key Takeaway: 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.Rule 1: Get the Data Right 131Rule 2: Set the Right Performance Standards 135The Next Disruption 136AfterwordWhat’s Next? 139Establish That You Need It 139Get Help 139Let’s Talk 140Connect with Us 140Visit www.walletrule.com 140Appendix AQuick Start Guide 141What Is the Wallet Allocation Rule? 141Wallet Allocation Rule Strategy 143Identifying Opportunities for Improving Share of Wallet 146An Example in the Credit Union Industry 147Conclusion 149Appendix BFrequently Asked Questions 151When Is It Appropriate to Use the Wallet Allocation Rule? 151Does the Wallet Allocation Rule Work with All Satisfaction Metrics? 152Is There a Preferred Metric We Should Use to Determine a Brand’s Rank? 153How Do I Ensure That All Relevant Competitors Are Ranked? 154What Metrics Should Be on My “Dashboard” Related to the Wallet Allocation Rule? 154Why Does the Wallet Allocation Rule Work? 155Will Relative Net Promoter Score Work? 155Isn’t Share of Wallet Just a Function of a Brand’s Reach (i.e., Penetration)? 156Visit www.walletrule.com 157Acknowledgments 159Principal Contributors 159About the Authors 187Timothy Keiningham, PhD 187Lerzan Aksoy, PhD 188Luke Williams 189Alexander Buoye, PhD 189Notes 191Index 211