Customer Share-of-Wallet and Customer Loyalty Increases in customer loyalty will parallel increases in customers' share-of-wallet. But it is wrong to presume that share-of-wallet increases are driven by increases in customer loyalty. A number of issues affect customers' spending allocation. Increased loyalty is not typically the reason for increased share-of-spending; price is. Long-Term Customers Vs.Short-Term Customers LOYALTY MYTH 1 : Long-Term Customers Are More Desirable than Short-Term Customers. It is a natural extension of the underlying logic in Myth 1 that, if long-term customers are more desirable than short-term customers because they are believed to purchase more, then long-term customers must be better for business than short-term customers. Given that the foundation of this myth is incorrect, it should not be a surprise that this extension is also false. Is Customer Revenue a Good Predictor of Profitability? Most firms treat customer revenue and customer profitability as synonymous. Revenue is a measure of purchase volume and, therefore, correlated to customer loyalty. As a result, firms tend to expend a great deal of effort on their highest-revenue customers. But revenue is typically not a good predictor of profitability. Some of the largest customers are the most unprofitable. Loyal Customers Are Less Expensive to Service than Nonloyal Customers? The fallacy that loyal customers are less expensive to service tha nonloyal customers has its origins in the manufacturing environment At its foundation are two seminal findings that dramatically influenced' the strategy and tactics of manufacturers around the world. The first is commonly referred to as the experience curve (also called the learning curve), originally popularized by the Boston Consulting Group. In essence, the theory behind the experience curve states that the costs of complex products and services will decline approximately 20 to 30 percent with each doubling of accumulated experience.

<< Start < Prev 1 2 Next > End >>