Business

Share of Wallet (SOW)

What is Share of Wallet (SOW)?

Share of Wallet (SOW) is the dollar amount the average customer regularly invests in a particular brand rather than competing brands in the same product category. The company tries to maximize the wallet share of existing customers by introducing multiple products and services to get as much revenue as possible from each customer. For example, a marketing campaign might have a stated goal of increasing a brand’s wallet share for a particular customer at the expense of competitors.

key takeaways

  • Wallet share is the amount that existing customers regularly spend with a particular brand, not the amount they buy from competing brands.
  • Companies increase their wallet share by introducing multiple products and services to get as much revenue as possible from each customer.
  • Marketing campaigns may focus on increasing spending by existing customers rather than increasing the overall market share of the product.
  • The benefits of increasing customer wallet share include increased revenue, improved customer retention, customer satisfaction and brand loyalty.

Understanding Wallet Share

While companies actively engage in sales to attract new customers, maximizing revenue per existing customer is equally important. Wallet Share focuses on a brand’s own customers and seeks to maximize their regular spend with that brand rather than competing brands. Companies may identify their most loyal customers based on the number of products they use or the revenue they generate. Since multi-product customers may have a favorable opinion of the company, offering additional services to upsell customers may prove fruitful. Also, new products can be made available to loyal customers in public, which will increase revenue and increase brand loyalty.

The benefits of increasing customer wallet share go far beyond increased revenue, but include improved customer retention, customer satisfaction, and the creation of a loyal built-in marketplace for new offerings in the future.

Wallet Share vs Market Share

Increasing wallet share may be a less costly, more efficient, and therefore more profitable strategy to increase revenue than trying to expand overall market share. It should be noted that wallet share and market share are two different concepts.

Market share is the percentage of a company’s total sales in its category or specific geographic area. For example, if bank executives wanted to add new corporate clients, they would analyze the existing market to determine how many businesses were in the area. From there, management can determine the percentage of the bank’s total customers in the region. So if a bank has 1,000 customers and there are 10,000 businesses in the region, the bank’s market share in the region will be 10%. Calculating market share helps companies determine the size of the opportunity in a region. The same analysis can be applied to a specific product or service.

Both market share and wallet share are focused on increasing revenue from customers. However, the growing market share focuses on attracting new customers from the competition. Wallet share, on the other hand, focuses on increasing revenue for existing customers by expanding the number of products used – which may also be gained from competition.

Targeted Marketing to Increase Wallet Share

The campaign to increase brand wallet share focuses on competing more effectively to take away some of the business from competitors. Such an activity might begin with an attempt to identify exactly what a customer finds in a competitor. It could be a broad question of quality, price or convenience, but it could be very specific. Competing grocery stores may have more vegan options or premium fresh produce. It may have faster checkout or free shipping.

Increasing your wallet share can mean adopting your competitors’ best ideas. It could also mean identifying goods or services that are an extension of business logic but can increase their share of wallet by displacing competitors. The Wegmans supermarket chain sells all the usual groceries, but its sprawling ready-to-eat section could be its true wallet share extender. Its selection competes with every takeaway restaurant in its stores and customers’ homes.

Increasing market share is increasing the brand’s total sales in its category, while increasing wallet share is additional revenue from existing customers.

Example of wallet share

For example, when McDonald’s added its breakfast menu, some customers may have changed their morning habits and started going to McDonald’s restaurants instead of Dunkin’ Donuts. McDonald’s has taken more money from its existing customers and some new customers to spend on fast food. So Dunkin’ Donuts may respond by expanding its breakfast menu to include egg sandwiches, perhaps to attract some breakfast customers.

Another example of wallet share in practice today is banking. A bank’s executive management may step up cross-selling, the sale of complementary products and services to existing customers. Wealth management clients may be referred to in-house mortgage representatives when they are on the market for a new home. Checking account customers may be encouraged to apply for auto loans at the bank. The bank is not acquiring new customers through this practice, but is increasing its share of wallets among existing customers.

In both cases, spending and revenue increased for each existing customer base, rather than money being spent on competitors.

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