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Luke Williams,Timothy Keiningham,Alexander J. Buoye,Lerzan Aksoy

The Wallet Allocation Rule

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Customer Loyalty Isn't Enough—Grow Your Share of Wallet The Wallet Allocation Rule is a revolutionary, definitive guide for winning the battle for share of customers' hearts, minds, and wallets. Backed by rock-solid science published in the Harvard Business Review and MIT Sloan Management Review, this landmark book introduces a new and rigorously tested approach—the Wallet Allocation Rule—that is proven to link to the most important measure of customer loyalty: share of wallet.
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.
With The Wallet Allocation Rule, managers finally have the missing link to business growth within their grasp—the ability to link their existing metrics to the share of spending that customers allocate to their brands.
Learn why improving satisfaction (or NPS) does not improve share. Apply the Wallet Allocation Rule to discover what really drives customer spending. Uncover new metrics that really matter to achieve growth. 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.
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Quotes

  • Egor Brushas quoted4 years ago
    To use the Wallet Allocation Rule to predict share of wallet, follow these steps:

    Establish the firms/brands in a product category that customers use.
    Ask an overall satisfaction/loyalty question to gauge performance for each firm/brand a customer uses.
    Assign a performance rank for each firm/brand for each customer (e.g., the highest rated firm/brand based on the overall satisfaction/loyalty question used would be ranked 1, the next highest 2, etc.).
    Calculate a customer-level Wallet Allocation Score (i.e., the customer's predicted share of wallet) using the rank and number of brands used by the customer.
    If you want to calculate firm/brand level scores, simply average the Wallet Allocation Scores for each firm's/brand's customers.
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    • Egor Brushas quoted4 years ago
      A big problem in effectively executing the Wallet Allocation Rule is that managers seldom understand what it really takes (in terms of benefits versus costs) to actually perform better than competitors. As a result, companies rarely identify and focus on the biggest opportunities for growth.

      In their Harvard Business Review article on creating organic growth, Booz & Company consultants Favaro, Meer, and Sharma present three variables for estimating potential growth opportunities that align well with the Wallet Allocation Rule approach. We believe these should be standard in any company:12

      Headroom for growth: “The number of clients and the share of wallet the company doesn't have minus the number of clients and share of wallet it is unlikely to ever have.”
      Switchers: “The clients who could be enticed to switch to a provider with a better offering.”
      Needs-offer gap: “The difference between the benefits that would cause those clients to switch their business and the benefits their current provider offers.”
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      • Egor Brushas quoted4 years ago
        A market sample provides managers with insight into the dynamics of the entire category, not just customers of your business. As such, managers can align their metrics with the market shares of their brands as well as competitors.

        Given this, why would any manager choose to use a customer-only sample? In a word, cost. Conducting a Wallet Allocation Rule analysis requires collecting information for a valid sample of your brand's customers. When using a market representative sample, that typically means collecting information from a large number of people.
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