Winning the Battle for Share of Wallet:
Turning New Customer Satisfaction Metrics into Financial Gain
Luke WilliamsVice President @ AECOM, Researcher, Author
2
Housekeeping©
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!
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