Ipsos Loyalty has launched a new research solution designed to help translate CRM (Customer Relationship Management) systems into increased share of wallet and, ultimately, greater share of market. This article is copyright 2012 The Best Customer Guide.

Aimed at helping executives understand the share of wallet dynamics in their businesses, Ipsos Loyalty launched the new 'Wallet Allocation Optimizer' (WAO) solution. The new product is the result of research that showed that most of the common measures of customer performance are used in an overly-simplified way by many brands, and that they often have little connection to real business results.

The study, conducted across nine countries through surveys with over 17,000 consumers, covered every major industry sector and provided eye-opening results for executives who measure customer success by means of simple metrics such as customer satisfaction or retention.

The development of WAO was led by Dr. Timothy Keiningham, Chief Strategy Officer for Ipsos Loyalty: "The value of WAO lies in the fact that it provides executives with a customer relationship metric and a system of understanding, which relates directly to financial performance and business success. It provides leaders with a rich understanding of share of wallet dynamics in their businesses and eliminates the problems of using inadequate customer relationship metrics such as retention and recommendation."

Ipsos Loyalty recognises that satisfaction and performance measurements are and will remain very important to evaluate how companies service their clients, but the company asserts that these metrics alone do not capture everything that is needed.

"These are useful metrics to set goals and incentivise your organisation. But satisfaction ratings should not and cannot be used alone to directly drive financial performance," explained Keiningham. "The same is true with recommendation metrics which usually correlate poorly with customer spending levels. The key is that rank matters: taking the competitive set into consideration allows a direct link to driving business results."

For example, Keiningham says that airlines often fall victim to the common trap of confusing retention with loyalty: "You can retain a customer without them being loyal; where they spend their money is the story of where their loyalty lies. Lots of airlines retain customers but have really low share of wallet, which means that people are spending just as much money, or more, with the competition. And it's not just Airlines we see this in, it's banks, retail, DIY, and every major category."