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Want To Boost Profits? Never Mind Customer Satisfaction, Watch Your Rank

According to a study released by researchers at Fordham University and Ipsos Loyalty, customer satisfaction is not the best indicator of brand performance for consumer product or service companies. According to the study of 17,000 consumers over two years, the researchers developed a new measuring tool for brand effectiveness, dubbed the Wallet Allocation Rule, and skillful use of the principal can net companies millions of dollars, putting them ahead of their competitors and boosting recognition and loyalty along with customer engagement.

Apparently “satisfied” customers are not necessarily the most loyal or profitable. Wal-Mart found this out the hard way. After launching a major renovation initiative after reviewing massive amounts of customer feedback, it cleared aisles, deleted endcaps, removed pallets of products and such, and sure enough, customer satisfaction scores rose – and same-store sales revenue entered the longest decline in store history! Apparently customers were happy to shop at Wal-Mart, but did a larger proportion of their shopping elsewhere. Share of “wallet” dissipated.

So if happy customers aren’t loyal, and their happiness doesn’t lead to spending, what does? Ranking of priority does, based on a simple formula that illustrates a high correlation between brand ranking and share of wallet, in a very predictable fashion. This takes into account not only the rank, where the consumer places your brand on the priority list, first, second etc., but also how many brands that do the same thing exist in the landscape of their shopping experience.

There is an elegant formula for calculating your rank, and for calculating your share of wallet, which I won’t go into here. For details, see .

While the article states essentially that companies that boost their ranking will be more successful, what the formula doesn’t tell you is how to boost the ranking of your brand upward. Based on the way they conducted the study, and our own research on the way consumers feel about brands, I can make some educated guesses. Consumers have an emotional connection to the brands they engage with, no matter how infrequently they cross paths. Most people won’t admit to that connection or characterize it as emotional, but in interview research on brand awareness and delivery on the brand promise, consistently the brands with the highest emotional engagement, or most noticeable and consistent delivery on the promise would be the most popular, regardless of the nature of that emotion. Sometimes getting people riled up about something cements that brand sufficiently in consumer’s minds to rank highly, due to the high level of emotional engagement, even though the emotion might appear negative.

The other factor at work here has more to do with awareness and visibility. The higher the frequency of engagement with a given brand, at least in brands that elicit a high emotional response, the higher the rank will be. Recency plays a part here, too, although not as big a part as you might think. If you’ve engaged with a brand more recently than others, that brand’s ranking will tend to be higher, but only by a small percentage, and any negative aspect to the engagement will erode the recency effect almost immediately. That paradigm puts a lot of the responsibility for boosting brand ranking squarely in the Marketing Department. Marketing has long been the home of the brand steward, but this study gives some teeth to their feeling that “the more we spend the more we make”. Big, vibrant, effective marketing campaigns that put product in consumer’s hands more frequently and regularly, as long as the experience is living up to the promise, will move more units by boosting ranking, taking money away from your competitors and spiking share of wallet.

While consumer product or service sales is not a zero-sum game, you can grab market share from your competitors, and if you grab share of wallet, revenue and profits rise noticeably. Those extra sales had to come from somewhere, unless you’re the only product in the category. Moral of the story is that you don’t have to be the fastest guy in the jungle, you just have to be faster than the guy next to you, to avoid being eaten.

About David Poulos

Speaker, Consultant and Author David Poulos is known as the Marketing Doctor because of his proven ability to accurately diagnose and prescribe the most effective solutions for successful business growth with absolute surgical precision.

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