Declare WAR on Customer Loyalty Measures

Customers who profess high satisfaction with your store, high loyalty to your business, and an interest in recommending you to friends will still go to other merchants. A major reason is that those customers may also be satisfied with and loyal to the others.
     Much of this is unavoidable. However, researchers at Ipsos Loyalty, Fordham University, and Vanderbilt University find that, with proper analyses, you can reduce the drift and significantly increase your share of your customers’ expenditures for the items you sell.
     The proper analyses involve what the researchers call your “Wallet Allocation Rule.” For the sake of brevity and to add dramatic appeal, I’ll call it the WAR score. And for the sake of reality, I’ll point out that if the calculation just below seems overly complex, you can adapt the procedure to what reliably works for you.
     The distinctive addition in the WAR calculation is that you also ask your customers about where else they shop and their degree of satisfaction with each of the alternatives to shopping with you. You then look at where you rank compared to the others and plug the numbers into the WAR formula for each customer surveyed:

     To calculate your overall WAR score, average the results obtained from the customers surveyed. You can calculate the WAR score for each of the other stores in the same way.
     The WAR derives from the researchers’ tracking of the purchase habits of more than 17,000 consumers in nine countries. The correlation between the WAR score and the share of wallet was, on average, 0.9. This is extraordinarily high for any consumer behavior study. A perfect correlation is 1.0. The correlation between changes in the WAR score and changes in the share of wallet averaged 0.8. This shows that measures you take to improve your WAR score are likely to pay off well.
     The researchers suggest these steps to raise your WAR score if your rank is not Number 1:

• First, ask your survey respondents what they specifically prefer about the others.
• Turn this information into possible action steps for your business.
• Estimate the costs of implementing each change and your best guess as to how much the implementation would increase your ranking for all customers.
• Make the changes with the highest potential for profitability.
• After you’ve given the changes sufficient time to make a difference, survey customers again.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Assess the Costs of Customer Satisfaction
Build Store Advocacy Beyond Customer Loyalty
Become the Only Game in Town
Respect Zipf’s Law