The Wallet Allocation Rule: Winning the Battle for Share - Hardcover

This is it! Finally, something definitive about what it takes to win the battle for share of customers' hearts, minds, and wallets.  Backed by rock-solid science, The Wallet Allocation Rule is a definite must read. Peter Jueptner, EVP of Strategy and New Business Development, Esteé Lauder Inc.     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     They put the Wallet Allocation Rule to the test and it performs. George Stalk, Senior Advisor, The Boston Consulting Group

The impetus for this book began as a quest for an answer to a problem that quite literally had shaken us to our core. We have dedicated our careers to helping companies win through improved customer loyalty. Throughout our careers, however, we consistently found that most of the things we were told about loyalty were wrong.

With each new set of myths we uncovered, we sought to set the record straight. We co-authored several books (Loyalty Myths, Return on Quality, The Customer Delight Principle, and Why Loyalty Matters) and award-winning papers so that the business community could gain from our insight and avoid the pitfalls we found.

But there was one overwhelming problem that we could not explain away. The measures we use to gauge customers' perceptions of their experience (e.g., satisfaction and Net Promoter Score) are so weakly correlated to customers' share of category spending with the brands that they use that the metrics are managerially irrelevant.

This problem challenged everything we believed about customer satisfaction and loyalty. Specifically, we expect more satisfied and loyal customers to devote more of their spending to a brand. That expectation is the primary reason that efforts to improve satisfaction and loyalty are supposed to be good business decisions.

The truth was horribly bad. On average, customers' satisfaction (or Net Promoter Score) levels explain around 1 percent of the variation in customers' share of category spending. No good manager knowingly makes decisions about how to allocate a company's scarce resources based on a 1 percent model fit.

The reality, however, is that we have in effect been doing this every time we ask managers to focus on improving the customer experience to improve business outcomes. Sadly, the purportedly better-fitting models presented to managers to justify these efforts are almost always based on very bad statistics.

The result has been that businesses seldom see meaningful returns on their efforts to improve the customer experience. Not surprisingly, this has caused managers to question using these metrics to guide their businesses.

Given the seriousness of the problem, we were compelled to see if there was a better way. We began an intensive investigation to uncover why satisfaction and other commonly used metrics do not link to customers' share of spending.

The result of this investigation was the discovery of the Wallet Allocation Rule, a simple formula that managers could use to determine the share of wallet that customers allocated to their brands.

The Wallet Allocation Rule was introduced in the Harvard Business Review and received the Next Gen Disruptive Innovation Award.  It has been subjected to rigorous scientific investigations. In addition, many of the strategies and tactics outlined in this book were introduced in the MIT Sloan Management Review.

Our goal in writing this book is to make businesses' efforts to improve customer satisfaction and loyalty pay dividends by giving managers a tool that we have proven works. We believe strongly that companies that apply the Wallet Allocation Rule can distinguish themselves in the eyes of both their customers and their shareholders.