A Longitudinal Analysis of Customer Satisfaction and Share of Wallet

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Bruce Cooil, Timothy L. Keiningham, Lerzan Aksoy, & Michael Hsu

A Longitudinal Analysis of Customer Satisfaction and Share of Wallet: Investigating the Moderating Effect of Customer Characteristics Customer loyalty is an important strategic objective for all managers. Research has investigated the relationship between customer satisfaction and loyalty in various contexts. However, these predominantly cross-sectional studies have focused on customer retention as the primary measure of loyalty. There has been little investigation into the impact on share of wallet. Using data from the Canadian banking industry, this research aims to (1) provide the first longitudinal examination of the impact of changes in customer satisfaction on changes in share of wallet and (2) determine the moderating effects of customer age, income, education, expertise, and length of relationship. Data from 4319 households using 12,249 observations over a five-year period indicate a positive relationship between changes in satisfaction and share of wallet. In particular, the initial satisfaction level and the conditional percentile of change in satisfaction significantly correspond to changes in share of wallet. Two variables, income and length of the relationship, negatively moderate this relationship. Other demographic and situational characteristics have no impact.

ustomer loyalty is an important strategic objective of managers around the world. A worldwide survey of chief executive officers conducted by the Conference Board (Bell 2002) found that customer loyalty and retention was the most important challenge that chief executive officers believed they faced. Despite managers’ emphasis on loyalty, however, brand loyalty is widely reported to be declining (Chancy 2001). Compared with the more exclusive loyalty of the past, consumers increasingly hold polygamous loyalty to brands (Bennett and RundleThiele 2005; Rust, Lemon, and Zeithaml 2004; Uncles, Dowling, and Hammond 2003; Uncles, Ehrenberg, and Hammond 1995). As a result, customers are increasingly dividing their purchases among multiple brands in a category. For example, Kraft Foods defines a loyal customer as someone who purchases 70% or more of the same brand within a category over three years. On the basis of this benchmark, 30 years ago, 40% of Kraft’s customers would


Bruce Cooil is Professor of Management, Owen Graduate School of Management, Vanderbilt University (e-mail: bruce.cooil@owen.vanderbilt. edu). Timothy L. Keiningham is Senior Vice President and Head of Consulting, Ipsos Loyalty (e-mail: tim.keiningham@ipsos-na.com). Lerzan Aksoy is Assistant Professor of Marketing, College of Administrative Sciences and Economics, Koç University (e-mail: laksoy@ku.edu.tr). Michael Hsu is Associate Vice President, Ipsos Reid (e-mail: michael.hsu@ipsosreid.com). Bruce Cooil acknowledges support from the Dean’s Fund for Faculty Research, Owen Graduate School of Management, Vanderbilt University.

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have been classified as loyal. Today, that number is closer to 15% (Zabin and Brebach 2004). Jones and Sasser (1995, p. 94) assert that “the ultimate measure of loyalty … is share of purchases in the category” (i.e., share of wallet). Although this may be an overstatement, because share of wallet is not as forward looking as other measures of loyalty (Oliver 1999), it is frequently used by researchers to operationalize loyalty behavior (e.g., Bowman, Farley, and Schmittlein 2000; Bowman and Narayandas 2004; Brody and Cunningham 1968; Cunningham 1956, 1961; Wind 1970). In an effort to increase customers’ share of spending with a brand, managers have focused on improving customers’ level of satisfaction. Rust (2002) explains the logic as follows: “Customer satisfaction and delight have a tremendous impact on customer retention and customer loyalty, and the result of that is that you...
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