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Share of Mind Leads to Share of Wallet

Guest post by: Mark Johnson

Article Overview: The link between customer loyalty and stock price performance is the ability to create incremental purchase behavior --- how share of mind leads to share of wallet. The more loyal a customer is in any industry, the less likely they are to purchase from a competitive brand. That is why even brands with high engagement scores and loyalty metrics are constantly looking to improve on them.

Share of Mind Leads to Share of Wallet

Several analysts have given Apple Inc. (NASDAQ:AAPL) an ‘outperform' rating. The company cited customer loyalty as one of the main factors that will contribute to stock performance. The firm stated that when customers purchase an Apple media or Smartphone product they are more likely to buy Mac computers or other Apple products. The link between customer loyalty and stock price performance is the ability to create incremental purchase behavior --- how share of mind leads to share of wallet. The more loyal a customer is in any industry, the less likely they are to purchase from a competitive brand. The brands with the high engagement scores and loyalty metrics are looking to continue to improve on them.

Successful brands like Apple have found a way to differentiate their service, product or offering to create high levels of customer loyalty and engagement. We continue to see a growing need in the market for research and the development of a loyalty metric that will validate that the more loyal a person is to a brand, product or merchant; the higher share of wallet that merchant, product or brand has.

The recent situation with Toyota casts an interesting light on the link between share of mind and share of wallet. There's no doubt that shareholders are questioning the quality of its products, reassessing the car maker's reputation, and scratching their heads wondering if their money would be (or would have been) better spent elsewhere. Like Apple customers who are willing to pay a premium its products, Toyota consumers have paid for the quality and reliability that has become synonymous with the Toyota name.

Will these customers remain loyal? The company is working to make sure the answer to this question is "yes." Current Toyota owners involved in the recalls (some 8.1 million autos) will receive superior service when they take their cars into their Toyota dealers in an effort to regain their loyalty and trust and encourage them to remain advocates for the brand. Toyota's entire strategy is built on quality and loyalty--- which is why the experience their customers receive during this challenging time is so critical.

Bruce Tempkin of Forrester Research recently explored the link between customer experience and loyalty. In his report called Customer Experience Boosts Revenue he analyzed consumer data to assess how a change in customer experience affects loyalty and how that can affect revenues. Here are some key findings as outlined in his blog:

o The difference in loyalty between companies in the top quartile of customer experience (when measured against industry averages) and the companies in the lowest quartile:

o 14.4% more customers willing to buy another product

o 15.8% more customers reluctant to switch

o 16.6% more customers likely to recommend

o The revenue change from a 10 point increase in a firm's Customer Experience Index results in a $284 million change for every $10 billion in revenue (average across 12 industries):

o Additional purchases: $65 million

o Reduction in churn: $116 million

o Word of mouth: $103 million

This data clearly backs up our intuition that customer experience impacts customer loyalty --- and that customer loyalty drives the bottom line.

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Article Tags: customer, loyalty, marketing



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