Winning the Battle for Share of Wallet:

Turning New Customer Satisfaction Metrics into Financial Gain

Luke WilliamsVice President @ AECOM, Researcher, Author

2

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2015 QUALTRICS LLC.

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Luke WilliamsVP @ AECOM, Researcher, Author

NY Times Bestselling Author of The Wallet Allocation Rule: Winning the Battle for Share

Nielsen Bookscan Bestselling Author of Why Loyalty Matters

Currently: Vice President, Client Measurement and Analytics, AECOM

Formerly: Head of Research Methods & Consulting, Ipsos Loyalty US

Initially: Younger, much more handsome

©2015 QUALTRICS LLC.

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“The aim of marketing is to know and understand the customer so well the

product or service fits him and sells itself.”

Peter DruckerWriter, Professor, and Management Consultant

Drucker, Peter (1973), Management: Tasks, Responsibilities, Practices. New York: Harper & Row Publishers, pp. 64-65.

MARKET SHAREIS A FUNCTION OF

SHAREOF

WALLET

PENETRATIONLEVEL

CUSTOMERUSAGELEVEL

Every CEO is Chasing Growth

The Next Competitive Battleground

89% of companies plan to compete primarily on the basis of the customer experience by

2016!

McLellan, Laura (2014), “10 Proof Points – Why Customer Experience Is the Next Big Thing,” http://blogs.gartner.com/laura-mclellan/10-proof-points-why-customer-experience-is-the-next-big-thing/

Your Satisfaction Guaranteed!

Bloomberg Businessweek: Worse is Better!

Chemi, E. (2013), “Proof That It Pays to Be America’s Most-Hated Companies,” Bloomberg Businessweek, December 17.

PurchaseIntention

Satisfaction Recommend Intention(Net Promoter classifications)

Detractor Passive Promoter

Overall Satisfaction Net Promoter classifications Purchase Intention

Timothy L. Keiningham, Bruce Cooil, Lerzan Aksoy, Tor Wallin Andreassen, and Jay Weiner (2007), “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Customer Retention, Recommendation and Share of Wallet,” Managing Service Quality, vol. 17, no. 4, 361-384. (Winner of the Outstanding Paper (Best Paper) Award)

Scatter diagram showing a customer’s share of wallet (Y Axis) by his/her satisfaction/net promoter/purchase intention level (X Axis)

R2 < .05R2 < .05 R2 < .08

Traditional Metrics Don’t Explain Share

It’s Easy to ProveA B C

1 Customer ID Satisfaction Share of Wallet

2 1 9 30%3 2 8 60%4 3 7 15%5 4 9 75%

998 997 10 35%999 998 9 45%

1000 999 8 25%1001 1000 8 50%1002 R-square 1.13%

The Biggest Company on Earth

Walmart Shined During the Recession

0%

5%

10%

15%

5%

10%

15%

Oct

08

Jul 0

8

Apr 0

8

Jan

08

Oct

07

Jul 0

7

Apr 0

7

Jan

07

Oct

06

Jul 0

6

Apr 0

6

Jan

06

Oct

05

Jul 0

5Recession

Target

Walmart

Walmart & Target Year Over Year Change in Same Store Sales

Walmart: Project Impact

Walmart is in the beginning stages of a massive store and strategy remodeling effort, which it has dubbed Project Impact. One goal of Project Impact is cleaner, less cluttered stores that will improve the shopping experience. Another is friendlier customer service.

Walmart: Project Impact

Simon, William, EVP and Chief Operating Officer, Walmart U.S. (2010), Wal-Mart Stores, Inc., Presentation at Bank of America Merrill Lynch Consumer Conference (March 10).

Customer Satisfaction Soared

Wal-Mart says Project Impact is driving consumer satisfaction to an all-time high.

But an Historic Same-Store Sales Decline

5%

4%

3%

2%

1%

0%

-1%

-2%

3%

1/08 4/08 7/08 10/08 1/09 4/09 7/09 10/09 1/11 4/11 7/11 10/09 1/11

Widespread rollout of Project Impact

“They loved the experience. They just bought less. And that generally is not a

good long-term strategy.”

William S. SimonPresident and CEO, Walmart USA

Clifford, Stephanie (2011), “Stuff Piled in the Aisle? It’s There to Get You to Spend More,” New York Times. (April 8), A1.

CUSTOMER UNDERSTANDING

PERFORMANCE MANAGEMENT

ORGANISATIONAL ALIGNMENT

What Do You Want to Achieve?

Your Score Matters!

Your Customer

Satisfaction----Rank

YourBrand

Janet Sat. 9

John Sat. 9

Janet & John both provide the same satisfaction/NPS rating for your brand

ALL firms consider this a good score

Your Rank Matters More!

Different Relative Ranks Result in Different Share of Wallet

Your Customer

Satisfaction----Rank

YourBrand

CompetitorsShare of WalletA B

Janet Sat. 9 9 10 25%Rank 2.5 2.5 1

John Sat. 9 7 8 50%Rank 1 3 2

Tied

The Wallet Allocation Rule Formula

Where:

Rank = the relative position that a customer assigns to a brand in comparison to other brands also used by the customer in the category

Number of brands = the total number of brands used in the category by the customer

80%80%

100%Mobile Phone

Wallet AllocationSh

are

of W

alle

t

0% 60%0%

60%Drugstores

Wallet Allocation

Shar

e of

Wal

let

0% 65%0%

65%Pharmacies

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%Mass Merchants

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%Retail Banks

Wallet Allocation

Shar

e of

Wal

let

0% 60%0%

60%Asthma Rx

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%Do-It-Yourself

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%Automobiles

Wallet Allocation

Shar

e of

Wal

let

20% 50%20%

50%Office Supplies

Wallet Allocation

Shar

e of

Wal

let

0% 80%0%

80%Airlines

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%Computers

Wallet Allocation

Shar

e of

Wal

let

R=.98 R=.99 R=.99

R=.92 R=.91 R=.96 R=.97

R=.78 R=.96 R=.94 R=.67

0% 100%0%

100%Grocery Stores

Wallet Allocation

Shar

e of

Wal

let

R=.93

It Doesn’t Matter Which Metric You Use!

Note: Scatter diagrams show the average share of wallet at the firm/brand level (Y-Axis) by the predicted average share of wallet using the Wallet Allocation Rule (X-Axis).

0% 100%0%

100%

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%

Wallet Allocation

Shar

e of

Wal

let

0% 100%0%

100%

Wallet Allocation

Shar

e of

Wal

let

R=.92R=.92R=.92

Average firm/brand Wallet Allocation Rule score and Share of Wallet across industries investigated.

Purchase IntentionSatisfaction Recommend Intention Net Promoter ScoreRecommend Intention

using NPS classifications

0% 100%0%

100%

Wallet Allocation

Shar

e of

Wal

let

R=.92

Performance was virtually identical regardless of the metric used to determine a brand’s relative performance rank

“Does this really make a difference to my business?”

“Yep.”--Luke Williams

What determines a brand’s rank is different

from what drives satisfaction!

How Value is Defined$$

$

Quantity

PRICE

WILLINGNESS TO PAYValue for Customer

COSTValue for Firm

Q*

But I Do Driver Analysis!

Drivers Affect Firm Strategy!!Using Drivers of

SatisfactionUsing Drivers of Share of Wallet

Diffe

renti

ation

/ M

arke

t Pos

ition

Driver Strength

Use Share-Based Strategy Grids Instead

Differentiation Opportunity

Significant Improvement Opportunity

Tapped Tapped or Adapt

Unmet Minimum Standard

Ownership Opportunity

WildcardW

indow

Dressing

TotalCustomer

Needs

Gaining share of wallet

requires reducing customers’ need to use

the competition

CHANGEMEASUREMENT

1. Add A>C>U.2. Change driver collection.3. Add barriers and open-ends.

CHANGE ANALYSIS

1. Add 2 new KPI to your scorecard.2. Add 1 new driver model to explain SOW. 3. Understand relative driver performance.

How You Achieve Change!

RANK MATTERS

more than the specific measure or score level and

relative performance is mandatory for true

understanding

ACTION MATTERS

and broad enterprise involvement is the core of customer centricity and driving customer and employee loyalty

How You Communicate Change!

Luke WilliamsResearcher. Author. Good Guy.

@themethodsman

Q&A

Thank You!