Summary of “The Wallet Allocation Rule: Winning the Battle for Share”

Authors: Timothy L. Keiningham, Luke Williams, Lerzan Aksoy, & Alexander J. Buoye\
Publication Year: 2015\
Category: Customer Relationship Management

Introduction

“The Wallet Allocation Rule” steers away from traditional customer satisfaction metrics and dives into a more robust framework for understanding consumer behavior. The authors argue that focusing solely on customer satisfaction or Net Promoter Scores (NPS) can mislead companies regarding their market share. Instead, they introduce the Wallet Allocation Rule (WAR), which emphasizes the share of wallet — the portion of a customer’s total spending within a category that a brand captures — as the ultimate determinant of success.

Chapter 1: The Satisfaction Trap

Key Point: Conventional metrics like customer satisfaction and NPS often fail to translate into increased market share.

Example: The book cites the example of a leading telecommunications company with high customer satisfaction scores but lagging behind competitors in market share.

Action: Instead of just tracking satisfaction scores, businesses should also measure their share of wallet and understand the competitive set.

Chapter 2: From Satisfaction to Share of Wallet

Key Point: The War Allocation Rule is a predictive model that links customer rankings of their providers directly to share of wallet.

Example: The authors demonstrate WAR using a case study from the airline industry. A frequent flyer might be highly satisfied with two airlines, but his spending will start to skew towards the one he perceives as providing better value.

Action: Implement ranking-based surveys rather than just satisfaction surveys to understand customer priorities and allocation of spending within a category.

Chapter 3: The Power of Ranking

Key Point: Customer rankings give direct insight into competitive positioning and future behavior.

Example: The book illustrates how a banking customer ranking his primary bank low in comparison to competitors indicates a lower share of wallet and potential for switching.

Action: Conduct surveys that ask customers to rank all the brands they use in a particular category to gauge competitive standing.

Chapter 4: Influencing the Customer Rankings

Key Point: Improving rank relative to other competitors will impact the share of wallet more effectively than focusing solely on satisfaction.

Example: In a retail context, customers may rank price competitiveness, product range, and store experience differently across multiple stores they patronize. A store consistently ranked first across these factors tends to command a higher share of wallet.

Action: Identify key drivers of ranking in your category and prioritize initiatives that improve your rank relative to competitors.

Chapter 5: Understanding Competitive Context

Key Point: Knowing the competitive context is essential for understanding where to improve in order to move up in rankings.

Example: The authors discuss the competitive context for coffee shops. While Starbucks might be ranked highly for ambience and product quality, a local competitor might edge out on price and convenience.

Action: Perform competitive analysis to identify the strengths and weaknesses of competitors and tailor your strategies to outdo them in key ranking criteria.

Chapter 6: Practical Application of WAR

Key Point: The Wallet Allocation Rule can be integrated into existing customer metrics systems to provide a fuller picture of market share.

Example: In the automotive industry, understanding how often customers rank a manufacturer first can directly correlate with increased spend on that brand, guiding investment in customer experience improvements where most needed.

Action: Embed WAR into monthly or quarterly review processes to continuously track and respond to customer rankings.

Chapter 7: Strategy Realignment Based on WAR

Key Point: Align strategic objectives based on insights from WAR to effectively capture a greater share of wallet.

Example: A telecommunications firm utilized WAR insights to refocus their marketing strategies, emphasizing unique selling points that pushed them up in customer rankings against competitors.

Action: Reallocate marketing and customer service resources to emphasize strengths identified by WAR and address weaknesses that cause lower rankings.

Chapter 8: Case Studies and Success Stories

Key Point: Real-world applications and outcomes demonstrate the effectiveness of WAR.

Example: A retail bank improved its share of wallet by focusing on improving mobile banking satisfaction after discovering this was a primary ranking criteria for customers.

Action: Regularly review case studies within the industry and adapt successful strategies to your business context.

Chapter 9: Advanced Applications of WAR

Key Point: WAR can be advanced beyond simple ranking by incorporating deeper analytics, such as segmentation and predictive modeling.

Example: A hospitality chain segmented customers by demographic factors and used advanced WAR analytics to target high-value segments more effectively.

Action: Invest in analytics tools and expertise to develop more nuanced WAR-based strategies, particularly for segmentation and targeted marketing.

Chapter 10: Future Trends in Customer Relationship Management

Key Point: The evolving business landscape requires agility in applying WAR and anticipating changes in customer behavior.

Example: As the authors suggest, upcoming changes in technology and consumer expectations will continually shift ranking criteria. In rapidly advancing sectors like technology, today’s advantage can quickly become tomorrow’s standard.

Action: Keep abreast of trends and continuously innovate customer experience and service offerings to stay ahead in customer rankings.

Conclusion

The “Wallet Allocation Rule” presents a disciplined approach to understanding and improving customer relationships. By focusing on rank and share of wallet rather than traditional satisfaction metrics, businesses can make targeted improvements that directly translate to market share gains.

By utilizing the recommended actions such as implementing ranking-based surveys, understanding the competitive context, aligning strategic objectives to WAR insights, and continuously innovating, businesses can create robust strategies to capture a greater share of their customers’ wallets. This redefined approach ensures business leaders are equipped with actionable insights that drive growth and loyalty in an increasingly competitive market.