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What is Share of Wallet?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 03 November 2016
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Share of wallet is a concept in marketing that refers to the percentage of a person's total spending dedicated to buying products and services from a particular company. Companies can conduct surveys to determine their share of wallet within given demographics to learn more about how their customers are interacting with them. There are numerous tactics that can be used to increase total spending by customers on a given company's products. For companies that want to increase revenue, there can be advantages to focus on expanding spending among existing customers rather than trying to attract new ones.

The more products and services a company offers, the greater its share of wallet will be. Companies can expand their offerings by developing related products that customers will buy because they have positive associations with a brand, or by branching out into new areas of an industry. Existing customers may switch loyalties because of their association with the brand, or consider adopting new products and services because they are offered by a trusted name.

Companies compete with each other for share of wallet. Many companies use tactics such as becoming a one-stop shop for customers, making it easy for people to get everything they need in one place. This can woo customers away from competitors who offer a more limited range of products. Revenue per user increases in response, and over time, the company can broaden its customer base by attracting people on the basis of recommendations from existing customers.

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Focusing on developing new customers can be costly. People must be persuaded to buy products in the first place and the payoff may be in the distant future. By contrast, developing better share of wallet is usually less expensive and can have more benefits in the long term. Existing loyal customers can be enticed to spend more and the ability to access a range of services and products may increase positive opinions of the company. This will lead to recommendations to friends and family, increasing market share in the long term.

Surveys to determine share of wallet can be used as a research tool to develop ideas for new products and services. Exploring interest from customers in new offerings is helpful for companies that are considering expanding production, acquiring other companies, or developing new business ventures. Companies can also keep track of suggestions, recommendations, and questions from customers to determine what kinds of products and services appear to be most in demand.

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burcidi
Post 3

That makes sense. I am an affiliate for a cosmetics company and I advertise their banners on my blog. If someone clicks on the banner and actually makes a purchase, the company will pay me a tiny percentage of the sale.

It has been about six months and although there have been quite a few clicks on the banners, no one has actually made a purchase. It made me realize how difficult it is to convince someone to try something for the first time.

I completely agree that a bigger share of wallet is a better way to increase profits. I personally purchase more from a company when there are discounts on shipping and free samples. Those might be good ways to increase share of wallet.

SZapper
Post 2

@JessicaLynn - I catch myself doing the same thing! I go in for two items and end up spending a hundred dollars.

I was just thinking though, there is a way for us as consumers to figure out what share various companies have of our wallet. I know some of the free budget tracking websites have a tool that lets you see exactly what you spent your money on all month. I think it might be enlightening to go take a look at that.

JessicaLynn
Post 1

I think the tactic of becoming a one stop shop is probably the best one for companies to get more share of wallet from its customers.

I know when I go into a stores that sells a variety of things, I always end up leaving with more purchases than I intended. Seeing all the products kind of reminds me of all the stuff I need that I forgot about. Or stuff I didn't even know I needed, but once I see it I have to have it!

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