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The Wallet Allocation Rule. Aksoy Lerzan
Читать онлайн.Название The Wallet Allocation Rule
Год выпуска 0
isbn 9781119037286
Автор произведения Aksoy Lerzan
Жанр Зарубежная образовательная литература
Издательство John Wiley & Sons Limited
A share of wallet strategy is about getting your customers to allocate a greater percentage of their spending in the category to your brand. It is almost always easier and more cost-effective to improve current customers' share of spending with a firm (i.e., share of wallet) than it is to acquire new customers. This is because, in most categories today, consumers are not loyal to a firm or a brand but rather by a set of firms and brands.
This means that more customers alter their spending patterns instead of completely halting business with a firm. Therefore, efforts designed to manage customers' spending patterns tend to represent far greater opportunities than simply trying to maximize customer retention rates. For example, a study by Deloitte finds that nearly 50 percent, on average, of hotel loyalty members' annual hotel spend is not with their preferred brand.26 Moreover, a study by McKinsey finds that the cost of lost wallet share typically exceeds the cost of customer defections. For example, McKinsey found that on average 5 percent of bank customers close their checking accounts each year; the impact of losing these customers results in a loss of 3 percent of the banks total deposits. By contrast, 35 percent of customers reduced their share of deposits each year, resulting in a loss of 24 percent of total bank deposits.27 Moreover, they observed this same effect for all 16 of the industries that they examined.
Although managers need to consider how each component of market share fits into their firms' overall growth strategies, share of wallet is the factor most directly affected by the customer experience. After all, share of wallet is arguably the most important gauge of a customer's loyalty – in fact, in their seminal Harvard Business Review paper, business consultant Thomas Jones and esteemed Harvard professor W. Earl Sasser, Jr., assert that share of wallet is “the ultimate measure of loyalty.”28 Clearly, loyalty builds as the result of consistently positive customer experiences.
As a result, both CEOs and CMOs make customer loyalty a top priority. Seventy percent of CMOs rank customer loyalty as a top three strategic priority for their firms – 93 percent put it in their top five.29 Similarly, CEOs consistently rank customer relationships in their top challenges – in fact, a recent global survey of CEOs found that this challenge is second only to getting top caliber employees.30
To achieve this goal, firms worldwide have adopted holistic customer experience management programs with the clear aim of improving the share of business that customers allocate to their brands. In fact, 65 percent of companies have a senior executive in charge of their company's customer experience efforts.31 And to help these companies, an entire industry has developed to maximize the customer experience at all points of contact within a company.32 The result is that companies spend billions of dollars each year to improve the customer experience.
To ensure that these efforts are positively affecting customer loyalty, most CMOs measure and manage customers' satisfaction and recommend intention levels (see Figure 1.1). In fact, marketing executives frequently rank customer satisfaction as their number one priority.33 Why? Because managers believe that spending on the customer experience results in the following chain of effects: customer experience → customer satisfaction → share of wallet.
Figure 1.1 Customer Loyalty Metrics Tracked by CMOs34
Unfortunately, it doesn't work out that way. Although the goal is admirable and the focus on the customer experience is imperative, managers are unable to connect their efforts to improve the customer loyalty metrics that they track with business growth. Spending more money on the customer experience often doesn't result in happier customers.35 Probably more critical for managers, improved satisfaction rarely leads to improved market share.
To find out why, we undertook an intensive investigation into the relationship between satisfaction and business outcomes. Our research – conducted with Professor Sunil Gupta at the Harvard Business School – uncovered two critical issues that have a strong negative impact on translating customer satisfaction into positive business outcomes. Moreover, these issues are equally applicable for other commonly used metrics, such as recommend intention and the Net Promoter Score (NPS).36 These two problems can be summarized as follows:
1. Satisfaction ≠ market share
2. Satisfaction ≠ share of wallet
Given the serious potential for damaging the financial performance of a company, these findings should affect every company's customer experience strategy.
Different Metric, Same Outcome
Before discussing the two most common problems, it is important for managers to understand that whether your firm tracks satisfaction, recommend intention, NPS, or some other commonly used customer survey–derived metric, you are unlikely to get managerially relevant differences in terms of their relationship to growth. This is because these metrics are actually measuring the same underlying construct – specifically, how positively customers feel toward the brand.37 So the argument that one metric works significantly better in linking to growth is not only erroneous but has been conclusively proved to be false in all large-scale peer-reviewed scientific investigations.38
Our own research clearly and easily demonstrated the fallacy of the “my metric is best” argument. We examined the NPS, which was sold as “the single most reliable indicator of a company's ability to grow.”39 To see whether that was indeed the case, we chose to examine the same data used to make this claim. Specifically, we replicated the charts used in the book The Ultimate Question by Fred Reichheld, the creator of NPS. These charts were used to demonstrate the performance of NPS in linking to growth. Because these industries were specifically selected for presentation in the book, they would clearly be expected to serve as the best examples of the relationship between NPS and growth.40
Without question, the strength of the relationship between NPS and business growth presented in these charts was impressive. But was it superior to other metrics? To find out, we used the data from these charts to compare NPS levels with customer satisfaction, specifically the American Customer Satisfaction Index (ACSI). Reichheld asserted that the ACSI was examined and found to have a 0.00 correlation to growth.41 (A zero correlation means that there is absolutely no connection to growth whatsoever.) Therefore, our examination should have given every advantage to NPS.
The results of our investigation, however, unambiguously proved that the claims of NPS's superiority were false. The left side of Figure 1.2 shows the NPS charts presented in The Ultimate Question. For the charts on the right, we simply substituted the ACSI levels for NPS for the same time periods. Surprisingly, the ACSI tended to perform better despite the fact that these same charts were presented as prime examples of the strength of the NPS-growth relationship.
Figure 1.2 A Comparison of Net Promoter Score and the American Customer Satisfaction Index Using Net Promoter Data from the Book The Ultimate Question
It is important to note that these charts do not prove that either the ACSI or NPS are strong predictors of growth. These examples simply
Weissenberg, Adam, Ashley Katz, and Anupam Narula. “A Restoration in Hotel Loyalty: Developing a Blueprint for Reinventing Loyalty Programs.” Deloitte Development LLC, 2013.
Coyles, Stephanie, and Timothy C. Gokey. “Customer Retention Is Not Enough.”
Jones, Thomas O., and W. Earl Sasser, Jr. “Why Satisfied Customers Defect.”
Aksoy, Lerzan. “How Do You Measure What You Can't Define? The Current State of Loyalty Measurement and Management.”
CEO Challenge 2014, Conference Board Research Report R-1537–14-RR.
Temkin, “The State of Customer Experience Management”
For example, see the Customer Experience Professionals Association, http://www.cxpa.org/.
Bradford, Harry. “1 °Companies with the Best Customer Experience.”
Reichheld, Frederick F. “The One Number You Need to Grow.”
Hayes, Bob E. “Customer Loyalty 2.0.”
Keiningham, Timothy L., Bruce Cooil, Tor Wallin Andreassen, and Lerzan Aksoy. “A Longitudinal Examination of Net Promoter and Firm Revenue Growth.”
“What Is Net Promoter?” accessed September 16, 2006, http://www.netpromoter.com/netpromoter/index.php.
Reichheld, Frederick F.
Reichheld, Frederick F. “Net Promoters.” Bain Audio Presentation (February 24, 2004), slide 4, accessed August 27, 2013, http://resultsbrief.bain.com/videos/0402/main.html.