The Wallet Allocation Rule

Chapter 4Customers as Assets

Maybe there is no profit on each individual jar, but we'll make it up in volume.¹

—Lucille Ball, Emmy- and Golden Globe–award winning comedian, model, and actress

Managers tend to obsess about their satisfaction (or Net Promoter Score [NPS]) levels. One of the first questions managers always ask us is, “What can we do to improve our score?”

Our answer seldom makes them happy. “If all you care about is the score, then cut your prices. Your scores will definitely go up.”

In fact, if you simply ask customers what the firm can do to make them happier, you can be certain that lowering price will be the most common answer. Everyone likes a bargain. Bargain prices, however, aren't always good for business.

Although this might sound obvious, it is not often seriously appreciated by managers in their quest to improve satisfaction and NPS levels. Rather, high satisfaction and NPS levels are typically treated as the end goal, with the assumption that good things will happen as a result. And to help make sure that scores go up, employees' bonuses are often tied to achieving them.

Continually devoting resources to improve satisfaction and NPS, however, has a dark side. Research shows that even when these efforts result in improved sales—which is by no means guaranteed—the return on the investment, after accounting for the cost of these efforts, is frequently near zero or even negative.² If left unchecked, the consequences can be disastrous.

An unfortunate example ...