The Wallet Allocation Rule

Appendix B

Frequently Asked Questions

There are naive questions, tedious questions, ill-phrased questions, questions put after inadequate self-criticism. But every question is a cry to understand the world. There is no such thing as a dumb question.¹

—Carl Sagan, American astronomer, astrophysicist, cosmologist, and author

When Is It Appropriate to Use the Wallet Allocation Rule?

The Wallet Allocation Rule focuses on improving the share of wallet of a brand's customers. Therefore, it is most relevant in situations in which a large percentage of a brand's customers also use a competing brand. Generally speaking, a category in which at least 40 percent of customers are “polygamous” (i.e., multibrand users) qualifies as a so-called repertoire market in which the Wallet Allocation Rule is applicable. In situations in which “hyperpolygamy” (i.e., using many brands) is common, an even larger number of monogamous customers can work. In terms of minimum average usage set size, a good rule of thumb is 1.4.²

For subscription (e.g., contractual services) or monogamous markets, the general concepts of the Wallet Allocation Rule can be applied to the list of brands a customer would consider using. This provides a context for the evaluation of the brand currently used versus perceptions of its competitors, which can be the basis for a measure of brand equity. To measure the impact of specific features, pricing considerations, and so on, discrete choice modeling³ is a useful addendum to ...