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Winning the Battle for Share of Wallet


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Join the author of “The Wallet Allocation Rule” as he dives into the research and analytics behind winning more share of wallet. In this session, Luke Williams explores the wallet allocation rule, and how changing methods or measurement and analysis, to more actively predict change, can be a sustainable competitive advantage.

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Winning the Battle for Share of Wallet

  1. 1. Winning the Battle for Share of Wallet: Turning New Customer Satisfaction Metrics into Financial Gain Luke Williams Vice President @ AECOM, Researcher, Author
  2. 2. 2 Housekeeping ©2015QUALTRICSLLC. The recording and slides for today’s presentation will be made available on along with other content and webinars from throughout the week Please use the chat window to submit questions throughout the webinar, we will have time designated at the end for Q & A Join the conversation on Twitter by tweeting @Qualtrics using #cxweek
  3. 3. Luke Williams VP @ 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
  4. 4. “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Peter Drucker Writer, Professor, and Management Consultant Drucker, Peter (1973), Management: Tasks, Responsibilities, Practices. New York: Harper & Row Publishers, pp. 64-65.
  5. 5. Every CEO is Chasing Growth
  6. 6. 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,” mclellan/10-proof-points-why-customer-experience-is-the-next-big-thing/
  7. 7. Your Satisfaction Guaranteed!
  8. 8. Bloomberg Businessweek: Worse is Better! Chemi, E. (2013), “Proof That It Pays to Be America’s Most-Hated Companies,” Bloomberg Businessweek, December 17.
  9. 9. Purchase Intention 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
  10. 10. It’s Easy to Prove A 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%
  11. 11. The Biggest Company on Earth
  12. 12. Walmart Shined During the Recession 0% 5% 10% 15% 5% 10% 15% Oct08 Jul08 Apr08 Jan08 Oct07 Jul07 Apr07 Jan07 Oct06 Jul06 Apr06 Jan06 Oct05 Jul05 Recession Target Walmart Walmart & Target Year Over Year Change in Same Store Sales
  13. 13. 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.
  14. 14. 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).
  15. 15. Customer Satisfaction Soared Wal-Mart says Project Impact is driving consumer satisfaction to an all-time high.
  16. 16. 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
  17. 17. “They loved the experience. They just bought less. And that generally is not a good long-term strategy.” William S. Simon President 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.
  19. 19. Your Score Matters! Your Customer Satisfaction ---- Rank Your Brand 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
  20. 20. Your Rank Matters More! Different Relative Ranks Result in Different Share of Wallet Your Customer Satisfaction ---- Rank Your Brand Competitors Share 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
  21. 21. 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 Share of Wallet = 1 − 𝑅𝑎𝑛𝑘 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐵𝑟𝑎𝑛𝑑𝑠 × 2 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐵𝑟𝑎𝑛𝑑𝑠
  22. 22. 80% 100% 80%ShareofWallet Wallet Allocation Mobile Phone 0% 60% 0% 60% ShareofWallet Wallet Allocation Drugstores 0% 65% 0% 65% ShareofWallet Wallet Allocation Pharmacies 0% 100% 0% 100% ShareofWallet Wallet Allocation Mass Merchants 0% 100% 0% 100% ShareofWallet Wallet Allocation Retail Banks 0% 60% 0% 60% ShareofWallet Wallet Allocation Asthma Rx 0% 100% 0% 100% ShareofWallet Wallet Allocation Do-It-Yourself 0% 100% 0% 100% ShareofWallet Wallet Allocation Automobiles 20% 50% 20% 50% ShareofWallet Wallet Allocation Office Supplies 0% 80% 0% 80% ShareofWallet Wallet Allocation Airlines 0% 100% 0% 100% ShareofWallet Wallet Allocation Computers 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% ShareofWallet Wallet Allocation Grocery Stores R=.93
  23. 23. 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% ShareofWallet Wallet Allocation 0% 100% 0% 100% ShareofWallet Wallet Allocation 0% 100% 0% 100% ShareofWallet Wallet Allocation R=.92R=.92R=.92 Average firm/brand Wallet Allocation Rule score and Share of Wallet across industries investigated. Purchase IntentionSatisfaction Recommend Intention Net Promoter Score Recommend Intention using NPS classifications 0% 100% 0% 100% ShareofWallet Wallet Allocation R=.92 Performance was virtually identical regardless of the metric used to determine a brand’s relative performance rank
  24. 24. “Does this really make a difference to my business?”
  25. 25. “Yep.” --Luke Williams
  26. 26. What determines a brand’s rank is different from what drives satisfaction!
  27. 27. How Value is Defined $$$ Quantity PRICE Value for Customer COST Value for Firm Q*
  28. 28. But I Do Driver Analysis!
  29. 29. Drivers Affect Firm Strategy!! Using Drivers of Satisfaction Using Drivers of Share of Wallet
  30. 30. Differentiation/MarketPosition Driver Strength Use Share-Based Strategy Grids Instead Differentiation Opportunity Significant Improvement Opportunity Tapped Tapped or Adapt Unmet Minimum Standard Ownership Opportunity Wildcard Window Dressing
  31. 31. Total Customer Needs Gaining share of wallet requires reducing customers’ need to use the competition
  32. 32. CHANGE MEASUREMENT 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!
  33. 33. 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!
  34. 34. Luke Williams Researcher. Author. Good Guy. @themethodsman
  35. 35. Q&A
  36. 36. Thank You!