Understanding Share of Wallet: Elevate Your Revenue Goals
Share of wallet (SOW) is the dollar amount an average customer regularly devotes to a particular brand rather than to competing brands in the same product category. Companies aim to maximize an existing customer’s share of wallet by introducing multiple products and services to generate as much revenue as possible from each customer. A marketing campaign, for example, may have a stated goal of increasing the brand’s wallet share for specific customers, thus outpacing its competitors.
Key Insights
- Share of Wallet: Amount spent by an existing customer on a particular brand versus competing brands.
- Revenue Growth: Achieved by introducing multiple products and services to existing customers.
- Targeted Marketing Campaigns: Aim to boost spending from existing customers rather than only increasing overall market share.
- Comprehensive Benefits: Includes added revenue, improved client retention, customer satisfaction, and enhanced brand loyalty.
Importance of Share of Wallet
Maximizing revenue from every existing client is just as crucial as acquiring new clients. Share of wallet focuses on a brand’s own customers, aiming to maximize the dollars they spend regularly on that brand rather than a competing one. Companies might identify their most loyal customers by ranking them based on the number of products used or the revenue generated. Offering additional products to these customers could prove fruitful as multi-product customers usually have a favorable view of the company. New product offerings to loyal customers before the public enhance revenue and bolster brand loyalty.
The benefits of increasing a customer’s share of wallet extend beyond revenue growth to include enhanced client retention, customer satisfaction, and creating a loyal market for introducing future products.
Share of Wallet versus Market Share
Increasing wallet share can be a more cost-efficient and profitable strategy for revenue enhancement compared to expanding overall market share, highlighting their differences:
- Market Share: Company’s percentage of total sales in its category or region.
- Share of Wallet: Focuses on increasing revenue from existing clients through expanding product use.
Example: If a bank seeks new business clients, they might analyze regional market data to determine potential customer numbers. With 1,000 clients in a 10,000-business region, the bank’s market share is 10%. Both market and wallet share grow revenue but differ in strategy—market share targets new clients while wallet share expands revenue from existing ones.
Strategic Target Marketing to Expand Your Share of Wallet
Enhancing a brand’s share of wallet involves more effective competition to capture some of a competitor’s business. Start by identifying what attracts customers to your competition —whether it’s product quality, pricing, or convenience. Consider adopting competitive advantages or introducing new services as logical extensions of your business; thereby, increasing your share by benefiting from competitors’ ideas.
Example: Wegmans’ ready-to-eat section competes with numerous takeout restaurants, acting as a significant wallet extender by drawing customers away from competitors and increasing Wegmans’ share of wallet.
Success Stories of Share of Wallet Strategies
McDonald’s Breakfast Menu Expansion
When McDonald’s added a breakfast menu, some customers might have switched their morning routine to McDonald’s from Dunkin’ Donuts, capturing more of their fast food dollars. In response, Dunkin’ might expand its breakfast options to regain those customers.
Bank’s Cross-Selling Practices
In banking, cross-selling efforts, such as referring wealth management clients to in-house mortgage representatives or encouraging checking account clients to apply for car loans, can significantly enhance share of wallet without acquiring new customers but increasing revenue from existing ones.
Each example underscores that enhancing spending and revenue from the existing customer base is a powerful alternative to drawing customers from competitors.
Related Terms: Market Share, Cross-Selling, Brand Loyalty, Customer Retention, Marketing Campaign.
