A Longitudinal Analysis of Customer Satisfaction and Share of Wallet: Investigating the Moderating Effect of Customer Characteristics

TLDR

Customer loyalty is a key strategic goal, yet prior research on satisfaction‑loyalty links has mainly used cross‑sectional designs and focused on retention, leaving the effect on share of wallet largely unexplored. This study longitudinally examines how changes in customer satisfaction affect changes in share of wallet and how age, income, education, expertise, and relationship length moderate this effect. Using a five‑year panel of 4,319 Canadian banking households and 12,249 observations, the authors model satisfaction and wallet changes. Results show that increases in satisfaction raise share of wallet, especially when initial satisfaction is high or the change is large, but higher income and longer relationships weaken this link, while other demographics have no effect.

Abstract

Customer loyalty is an important strategic objective for all managers. Research has investigated the relationship between customer satisfaction and loyalty in various contexts. However, these predominantly cross-sectional studies have focused on customer retention as the primary measure of loyalty. There has been little investigation into the impact on share of wallet. Using data from the Canadian banking industry, this research aims to (1) provide the first longitudinal examination of the impact of changes in customer satisfaction on changes in share of wallet and (2) determine the moderating effects of customer age, income, education, expertise, and length of relationship. Data from 4319 households using 12,249 observations over a five-year period indicate a positive relationship between changes in satisfaction and share of wallet. In particular, the initial satisfaction level and the conditional percentile of change in satisfaction significantly correspond to changes in share of wallet. Two variables, income and length of the relationship, negatively moderate this relationship. Other demographic and situational characteristics have no impact.