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When it comes to B2B and B2C success, it's often important to create a loyal customer base. But even loyal customers decide between different brands on a regular basis. The key is to know what shapes their decisions.
Content:
- What's the difference between market share and share of wallet?
- How can you use the share of wallet?
- B2B Example: an expensive laptop to save money?
- B2C example: #1 supermarket
- Share of wallet focuses on the customer’s point of view
Usually, companies look at the market share but in recent years, share of wallet has gained traction as an important KPI and as a great way to understand customers and their priorities.
But first things first:
What's the difference between market share and share of wallet?
Market Share: a slice of the cake
The market share is the share of revenue that a company has in regards to the whole market. If, for example, 30% of all purchased laptops are from Apple, then Apple’s market share for laptops is 30%. Market share includes all customers and budgets that are available in a specific market.
Share of wallet: how much does each individual customer spend?
The share of wallet, on the other hand, defines how much a customer spends in a certain market for a specific company. If, for example, a company wants to buy new laptops for their employees and only buys MacBooks for higher management (10% of all employees), then Apple has a share of wallet of 10% for that particular customer.
How can you use the share of wallet?
Share of wallet is not a static number. You can look at it as a starting point that you can use to optimize your customer communication, work on your products and services and adjust marketing strategies and target groups to increase the share of wallet.
One of the most important aspects of share of wallet is the focus on the customer's decision and their reasons. To effectively work with share of wallet, you need to communicate with your customers to find out why they spend more money on one brand instead of another. However, this goes beyond mere "Were you satisfied"-surveys, since satisfaction alone does not always give the necessary information you need to increase your share of wallet.
As Timothy L. Keiningham, Lerzan Aksoy, Alexander Buoye and Bruce Cooil explained in the article "Customer Loyalty isn't enough - grow your share of wallet", customer satisfaction is of course responsible for your success but it is not always the main reason.
Quite often, the customer (or brand) experience is at least as much if not more responsible for the purchase decisions of a customer.
The authors write that companies need to understand why customers prefer certain companies. If they aren’t the first choice, they should ask the customers why that is.
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B2B Example: an expensive laptop to save money?
Let’s stay with our laptop-example.
Let’s imagine that a computer manufacturer asks their customers why they only purchase MacBooks for 10% of their staff. They receive the reply that their products have the same guarantee length than cheaper products by the competition which in turn means that they are more expensive on average since laptops need to be exchanged after the guarantee runs out per company compliance rules.
The manufacturer could create whitepapers and infographics that show how many resources a company could safe by having laptops that are less prone to computer viruses, have faster booting times or offer better software.
Fun fact: regardless of the computer model, the average American employee spends 22 minutes daily with IT problems. In a 40-hour-week, this results in more than 11 work days each year (source: CareerBuilder via employtest.com).
B2C example: #1 supermarket
In the aforementioned article, the authors give the example of a supermarket franchise that was not the first choice of their customers despite amazing reviews. A customer survey showed that price and location of other supermarkets were simply more convenient.
Since the supermarket franchise couldn’t afford to reduce all of their prices, they looked at the most popular products and reduced juse these prices. This small change already resulted in a share of wallet-increase of 6% and an increase in sales of 62 million US-dollar.
Share of wallet focuses on the customer’s point of view
A great side-effect of trying to increase the share of wallet has become evident in the examples: companies need to look closely at their customer’s wishes and needs. When it comes to the market share, most companies focus on their competition and ask themselves: what differentiates them from us?
But when looking at the share of wallet, companies are much more inclined to ask: why does the customer differentiate? How do they make their decision?
Additionally, it puts more emphasis on existing customers instead of new customers because it’s not concerned with raising the market share (to interest new customers within that market) but rather to raise the worth with existing customers (to become #1 for them). Since loyal customers in general are more likely to spend more and act as brand ambassadors, share of wallet can help increase revenue in the long run which strengthens the entire business model, especially during disruptive events such as a pandemic.
Our DIGITALL experts support your company in setting up the right data models, dashboards, and systems to keep an eye on share of market, share of wallet and gain a 360° customer view.
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