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 xvii

Foreword xix

Chapter 1

It’s “Oh My God!” Bad 1

Key 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 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

Chapter 2

Eureka! The Discovery of the Wallet Allocation Rule 27

Key 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 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

Conclusion 49

Chapter 3

The Wallet Allocation Rule in Action 51

Key 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 52

Putting the Wallet Allocation Rule to Work 53

Conclusion 88

Chapter 4

Customers as Assets 89

Key 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 91

Revenue ≠ Profits 98

Short-Term Gain, Long-Term Pain 99

Money-Losing Delighters 102

Aligning Satisfaction, Share of Wallet, Revenue, and Profit 104

Conclusion 106

Chapter 5

New Metrics That Matter for Growth 109

Key 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 110

Must-Have Marketing Metrics 112

Customer Satisfaction 115

Key Drivers and Market Barriers 121

Demand Evidence 127

Chapter 6

Making It Happen 129

Key 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 131

Rule 2: Set the Right Performance Standards 135

The Next Disruption 136

Afterword

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

Appendix A

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

Conclusion 149

Appendix B

Frequently Asked Questions 151

When Is It Appropriate to Use the Wallet Allocation Rule? 151

Does the Wallet Allocation Rule Work with All Satisfaction Metrics? 152

Is There a Preferred Metric We Should Use to Determine a Brand’s Rank? 153

How Do I Ensure That All Relevant Competitors Are Ranked? 154

What Metrics Should Be on My “Dashboard” Related to the 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’s Reach (i.e., Penetration)? 156

Visit www.walletrule.com 157

Acknowledgments 159

Principal Contributors 159

About the Authors 187

Timothy Keiningham, PhD 187

Lerzan Aksoy, PhD 188

Luke Williams 189

Alexander Buoye, PhD 189

Notes 191

Index 211

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