Published September 2005

Share of wallet
important to businesses

Why is “share of wallet” an important metric to your business? Because increasing share of wallet costs less than increasing share of market.

Both strategies are designed to increase sales revenue; and consequently, wallet strategies usually generate a greater return-on-investment.

My past two columns have examined share of market and share of preference. This month’s feature demonstrates: 1) the “factors” that contribute toward share of wallet; and 2) example “strategies.”

Let’s begin with an accurate definition. Many people, even marketing professionals, consider share of wallet a “frequency” and “amount” of purchases calculation. Real share of wallet measures the amount of the customers’ total spending you are capturing in any particular category.

David Diamond, chief vision officer for Catalina Marketing — a global leader in behavior-based communications — calls this measurement the Loyalty Quotient, and says, “All you have to do is ask the simple question: how much of your money do you spend with me?”

Easier said than done!

Factors: The key to increasing share of wallet is to understand what “factors” influence purchasing behavior among your customer base. Your task is to find out why your customers divide their purchases over multiple outlets, and how they choose who they purchase from.

Regardless of your industry, you have “points of contact” with your customers; they aren’t limited to, but ultimately coincide with a purchase. Use that contact opportunity to gather loyalty data. This may require an incentive (especially in e-commerce and retail sectors) to prompt customer participation.

You want to dig deeper than the traditional “what is your satisfaction level” type questions. Find out why they buy from you, who else they buy from and what tips their scale. A question we ask when conducting marketing research for our clients is: If you had to decide between purchasing from two different companies, what is the most important factor in that decision? This always reveals great insight.

Strategies: Once you understand the factors that drive purchasing behavior you can adjust your marketing approach to line up with those factors. Following are a few examples of strategies that effectively increased share of wallet.

• Most airlines jumped on the “frequent flyer” bandwagon, which commoditized the concept. So, Hawaii Airlines began allowing their points to be redeemed for rental cars, hotels and golf. This strategy “distinguished” their program and appeals to different behavior-based segments of the market.
• Consider the Capital One advertising slogan, “What’s in your wallet.” This is the ultimate definition of “share of wallet.” They were leaders in offering balance transfers (from competing cards) to support their lower interest rate “value” proposition.
• Finally, Tostitos Chips was launched (by Frito-Lay) in 1981. Ten years later they introduced Tostitos Salsa. This increased their share of wallet through a product “relationship” strategy by selling dip to their chip customers — two products that often are purchased at the same time.

As you develop your “wallet” strategy, keep in mind that the three most important factors that increase wallet share are: distinction, value and product relationship.

Next month — How corporate citizenship can add muscle to your marketing program.

Andrew Ballard, president of Marketing Solutions Inc. in Edmonds, develops brand leadership strategies for businesses and teaches strategic marketing through Edmonds Community College. He can be reached at 425-672-7218 or online at www.mktg-solutions.com.

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