Companies spend a great deal of time and money trying to improve customer loyalty by measuring and managing metrics like satisfaction and Net Promoter Scores. But traditional gauges of loyalty correlate poorly with what matters most: share of wallet. This is the percentage of a customer’s spending within a category that’s captured by a given brand, or store or firm. Customers may be very satisfied with your brand and happily recommend it to others—but if they like your competitors just as much (or more), you’re losing sales. Making changes to increase satisfaction won’t necessarily help. This doesn’t mean traditional metrics aren’t valuable; it can be very useful to know whether your customers are satisfied and would recommend you to their friends and colleagues. But these measures in themselves can’t tell you how your customers will divide their spending among you and your competitors.
A version of this article appeared in the October 2011 issue of Harvard Business Review.