The latest (October) edition of the The Harvard Business Review writes that Customer Loyalty Isn’t Enough – Grow Your Share of Wallet (note: you may need to register to view this material – article authors listed below).

Essentially, the authors (below) are reminding us of the importance to focus less on ourselves, and more on the competition.  Or more specifically, why our customers focus on the competition.  They go further and present a number of simple formulas to estimate your businesses “wallet share” of your customers, or the proportion of their spending that is going to you or away from you to your competitors.  They suggest that where you are not number one in your niche, to ask why, and not get distracted with satisfaction measures that may only lead you to preach to the converted.

They make the example of a supermarket providing a nice ambiance that scores well on satisfaction surveys.  Focusing on this strength may further enhance customer satisfaction along this dimension, but may not address your competitive weaknesses if in fact, it is price of staples that is driving your customers toward your competition.

The authors also remind us of the importance focusing on our competitive environment, and addressing that, rather than focusing on our own strengths and weaknesses.

My personal experience supports this argument as I have seen all to many businesses fail over the years that took a personal passion or flair and turned that in to a business only to realise too late that it was not what the market was looking for.

I argue that before investing a single hard earned dollar toward any venture, it is of critical importance to understand the current market and competitive environment.  Belief in one’s self and one’s vision is inspiring, but will it draw customers away from your competition?

I wish to thank the Harvard Business Review and Timothy L. Keiningham, Lerzan Aksoy, Alexander Buoye, and Bruce Cooil for providing the inspiration for this article.

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