Managers believe that improved satisfaction levels result in improved share (both share of wallet and market share). The reality, however, is not nearly so simple. Higher firm-level satisfaction is typically associated with lower market shares. And customer-level satisfaction is so weakly correlated to the share of category spending that customers allocate to the brands they use that it is managerially irrelevant. As a result, the returns on investments to improve the customer experience are frequently trivial, even negative.
The Wallet Allocation Rule, by Timothy Keiningham, Lerzan Aksoy, Luke Williams, and Alexander Buoye, tackles these issues head on. The book pulls from current scientific research in service management to support its call for a new approach to the measurement and management of customer satisfaction and loyalty. The foundation of this approach is a new model—the Wallet Allocation Rule—from which the book gets its name.
The Wallet Allocation Rule is a method for linking satisfaction (and other commonly used loyalty metrics) to share of wallet. The fundamental underpinning of the rule is that satisfaction levels are meaningless absent competitive context. Moreover, taking competition into account can be easily done by shifting from a focus on absolute to relative metrics—in the case of the Wallet Allocation Rule, relative “ranked” satisfaction. In other words, a firm or brand used by a customer that receives his or her highest satisfaction level would receive a rank of “1,” the next highest a “2,” and so forth. With the Wallet Allocation Rule, these ranks can used to estimate the share of wallet a customer allocates to a particular brand.
While the rule is conceptually and mathematically simple, the implications are not. Of particular importance, the key drivers of satisfaction are almost never the same as the key drivers of rank (and therefore share of wallet). That is because customers typically use competing brands for different reasons. Therefore, the key to gaining share of wallet rests on reducing customers’ perceived needs to use the competition.
“If your goal is market share leadership, this book is a must read!”
Mary Jo Bitner, Professor and Edward M. Carson Chair, Arizona State University, Editor, Journal of Service Research
“Groundbreaking work for marketing leaders and a must read. The Wallet Allocation Rule is the next big thing!”
Jim Welch, Director, PwC’s PRTM Management Consulting
“The Wallet Allocation Rule presents revolutionary insights that redefine the measurement of customer loyalty.”
V. Kumar, Regents Professor and Richard and Susan Lenny Distinguished Chair, Georgia State University
“They put the Wallet Allocation Rule to the test and it performs.”
George Stalk, Senior Advisor, The Boston Consulting Group
“This book is essential reading for anyone who wants to know how to improve customers’ buying behavior. I am sure this book will be on every executive’s desk.”
Jay Kandampully, professor in Services Management and Hospitality, The Ohio State University, Editor, Journal of Service Management