The science of customer preference
The Wallet Allocation Rule® connects how customers rank your brand with how they divide their spending.
A simple formula. A different way to think about growth.
One customer. Three brands.
Relative rank → estimated share of wallet
Illustration of the rule, not measured spending.
01 / The big idea
Customers can be satisfied with several brands at once. Their spending depends on your place among the alternatives they actually use.
Share of wallet is the percentage of a customer’s spending in a category that goes to your brand. It differs from market share, which measures your portion of the entire market.
The Wallet Allocation Rule shifts the question from “How high is our score?” to “How do we rank against the competition?” Improving satisfaction can matter—but it may not increase your share if competitors remain equally or more preferred.
02 / How the rule works
Start with each customer’s own category and set of brands. Then apply the rule at the individual level.
Find the brands, stores, or providers the customer actually uses in the category. Count them: this is N.
Collect comparable satisfaction or loyalty ratings for every brand used. Rank highest to lowest: the focal brand’s rank is R. For ties, use the average of the occupied ranks.
Apply the formula for each customer and brand. Average the individual estimates to describe the brand’s share among the customers studied.
The Wallet Allocation Rule formula
Estimated share of wallet
= (1 − R / (N + 1)) × (2 / N)
R = the brand’s relative rank N = number of brands used
Multiply by 100 for a percentage. Use customer-level ranks, not the rank of aggregate brand scores. The result is an estimate, not a guarantee of an individual’s spending.
A worked example
(1 − 2 / 4) × (2 / 3)
33.3%estimated share of this customer’s category spending.
If two brands tie for first among three, each receives rank 1.5 and an estimated share of 41.7%.
03 / The science
Selected work introducing the rule and testing the relationship between relative satisfaction and spending.
Harvard Business Review · 2011
The original managerial introduction to the rule, with guidance on turning customer ratings into relative rankings.
Timothy Keiningham, Lerzan Aksoy, Alexander Buoye, and Bruce Cooil
Journal of Service Management · 2015
An examination of the connection between relative satisfaction metrics and customers’ share of spending, providing a scientific foundation for the Wallet Allocation Rule.
Timothy L. Keiningham, Bruce Cooil, Edward C. Malthouse, Alexander Buoye, Lerzan Aksoy, Arne De Keyser, and Bart Larivière · Vol. 26, no. 1, pp. 2–43
Robert Johnston Outstanding Paper Award · Journal of Service Management
MIT Sloan Management Review · 2014
A managerial perspective on why customer satisfaction investments need to account for competitive preference and share of wallet.
Timothy L. Keiningham, Sunil Gupta, Lerzan Aksoy, and Alexander Buoye · Vol. 55, no. 3 (Spring), pp. 37–46
Links lead to the original publishers. Some articles require purchase or institutional access. Results depend on the category, sample, and measurement design.
04 / The book
New York Times bestseller
Winning the Battle for Share
Timothy Keiningham · Lerzan Aksoy
Luke Williams · Alexander J. Buoye
Wiley · 2015 · ISBN 9781119037316
The book develops the research into a practical approach for understanding the spending you capture, the spending that goes elsewhere, and the competitive preferences behind that split.