Choosing you instead of your competition
Let’s begin with an accurate definition. Share of wallet measures the amount of the customers’ total spending in the category a company is able to capture. So, if a person spends $100 per week on groceries, and $65 of that amount is spent at Albertsons, that means that Albertsons has a 65 percent share of that customer’s wallet.
David Diamond, chief vision officer for Catalina Marketing, calls this measurement the Loyalty Quotient: “All you have to do is ask the simple question: how much of your money do you spend with me?” Easier said than done!
The key to increasing share of wallet is to understand what “factors” influence purchasing behavior among your customers. 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 to gather loyalty data. This may require an incentive to prompt customer participation. Find out why they buy from you, who else they buy from and what tips their scale. A question asked in marketing research is: If you had to decide between purchasing from two different outlets, what is the most important factor in your decision? It’s to find the underlying motives that drive consumer behavior.
Once you understand the factors that drive purchasing behavior you can adjust your marketing approach to line up with those factors. Developing a customer loyalty program is a general approach.
Most airlines jumped on the “frequent flyer” bandwagon. About 15 years ago Hawaiian Airlines began allowing their points to be redeemed for rental cars, hotels and golf. It increased their share of wallet. Consider the Capital One advertising slogan, “What’s in your wallet.” This is the ultimate definition share of wallet. They were leaders in offering balance transfers from competing cards to support their lower interest rate “value” proposition. Finally, Tostitos Chips were 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, which are often purchased at the same time.
Most industries play in a zero sum market economy. An increase in your share of wallet comes at the expense of others vying for the same spend. That is why you want to pay attention to your share of wallet.
As you develop your strategy, the three most important factors are: distinction, value and product relationship.
MORE HBJ HEADLINES
Our new comment system is not supported in IE 7. Please upgrade your browser here.