Since marketing for existing customers is gaining more importance and methods like account-based marketing see each B2B-customer as a single market, it’s time to look at market shares in detail.
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 the whole „bucket“ of 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.
Download our infographic on the differences between share of wallet and market share.
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 – especially in the context of account-based marketing – use with the right communication and information. The important aspect is to know, why other sellers and products are being preferred or why your company is not regarded for all the spending in their respective category. A dialog with your customers is crucial to gain this information.
The concept of this approach isn’t new, by the way. In 2011 Timothy L. Keiningham, Lerzan Aksoy, Alexander Buoye and Bruce Cooil explained in the article „Customer Loyalty isn’t enough – grow your share of wallet“ that customer satisfaction is partially responsible for your success but is not necessarily the main reason. Quite often, the experience of the brand or the image 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.
Example 1 in B2B: an expensive laptop to save money?
Let’s stay with our laptop-example. Let’s imagine that Apple asks their customers why they only purchase MacBooks for 10% of their staff. They receive the reply that Apple products have a guarantee that is not longer than that of cheaper products which means that they are more expensive on average since laptops need to be exchanged after the guarantee runs out per company compliance rules. Let’s imagine also that Apple can’t just change the guarantee-dates for their laptops, so they have to find other ways to make their product more attractive for the customer.
Apple could create white papers and infographics – based on studies – that show how much working time employees spend with less efficient laptops, whether it’s due to long and complex update cycles, loading times or booting. 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). That way, Apple could convince the company that it is indeed saving money by buying more Apple-products, even if the guarantee isn’t longer than that of cheaper models.
Example 2 in B2C: the #1 in supermarkets
In the aforementioned article, the authors give the example of a supermarket franchise that is 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 their 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 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 they look 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).
Raise the share of wallet by concentrating for on your customer’s needs and create a journey that is both relevant and personal. Find out more about Customer Journey Management and how you can implement it in your company.
https://www.ec4u.com/ec4u-blog/wp-content/uploads/sites/3/2019/02/wallet_tookapic_Pixabay.jpg269710Juliane Waackhttps://www.ec4u.com/ec4u-blog/wp-content/uploads/sites/3/2016/02/Logo-ohne-Schriftzug.pngJuliane Waack2019-02-27 09:00:512020-09-04 10:27:55Share of Wallet vs. Market Share: Closer to your customers (infographic)