Share of wallet is the amount an existing customer spends regularly on a particular brand rather than buying from competing brands. … Benefits from increasing a client’s share of wallet include added revenue, improved client retention, customer satisfaction, and brand loyalty.
For example, if a customer spends $60 a month at fast food restaurants, and $30 of that amount is spent at McDonald’s, McDonald’s has a 50% SOW for that customer. The term is sometimes expressed as wallet share.
The higher the share of wallet, the more dependent your suppliers are on your marketplace for their income and the more reliant your buyers are on your marketplace when it comes to sourcing a specific good or service. Optimising for a high share of wallet can be one of the most important growth levers for marketplaces.
Calculating share of wallet is done by dividing money spent on a product or at a company by the total amount a customer spends in that category.
Why Wallet Share is Important
Share of wallet is a key sales metric because of the fundamental nature of selling products. According to marketing studies, it is five to seven times less expensive for a company to make additional sales to existing customers than it is to create new customers.
Share of wallet and market share are very different concepts. … Calculating market share may require you to work out the total addressable market (TAM) for your product. By contrast, share of wallet tracks the amount that a specific customer spends on a brand relative to the amount they spend on competitors.
Share of Requirements
- Share of requirements, also known as share of wallet, is calculated solely among buyers of a specific brand. …
- Unit Share of Requirements (%) = [Brand purchases (#) ÷ Total category purchases by brand buyers (#)] x 100.
STRATEGIES FOR INCREASING CUSTOMER’S WALLET SHARE
- Know your customers. The first way to increase the customer’s wallet share is to know them and understand their spending or purchasing behavior. …
- Track and increase customer satisfaction. …
- Engage your customers. …
- Improve your rank.
From company to company and industry to industry, the correlation between a brand’s Wallet Allocation Rule score and its share of wallet was remarkably consistent—the average was greater than 0.9 (a perfect correlation is 1.0).
The focus of customer share is to increase revenues from existing customers. … In addition to measuring loyalty and advocacy (referrals), your Marketing performance measurement system should include some type of customer share measure or metrics.
How do you measure wallet size?
The length is the distance from one side of the purse/wallet to the other side. It is calculated by measuring at the lengthiest point. The height is the distance from the bottom of the purse/wallet to the top. It is calculated by measuring from the base to the highest point of the bag.
Definition (1): It is the portion of the customer’s purchasing that a company gets in its product. Definition (2): Beyond simply retaining good customers to capture customer lifetime value, good customer relationship management can help marketers increase their share of customers. …
What is size of wallet in marketing?
This has prompted a wide variety of insights into customer behaviour and has led several researchers to investigate the relationship between customer behaviour and size of wallet (SOW), which is the measure of the spend capacity of a customer on a particular product category across different firms.
SOW (also known as wallet share) helps gauge a company’s competitive position – what percentage of a customer’s spending for a type of product or service goes to a particular company. For e.g., if a guest spends $100 on groceries and $50 of that amount is spent at Target, Target has a 50% SOW for that customer.
What do you do with unprofitable customers?
The authors recommend this five-step process for managing problem customers:
- Reassess the Relationship. …
- Educate Customers. …
- Renegotiate Your Value Proposition. …
- Migrate Customers. …
- Divest as a Last Resort.
What is up sell and cross sell?
Upselling grows the revenue by promising a higher level product, while cross-selling does the same by suggesting more products to buy. … You can think of upselling as an upgrade to the existing purchase when cross-selling is an additional purchase.