Share of Wallet: why it matters to your company
There’s no denying the importance of good regular customer satisfaction metrics. They provide management with an excellent appreciation of how you’re performing in the eyes of the customer and what issues need attending to.
But: what if your company’s high satisfaction scores aren’t generating similarly healthy revenues?
It’s an easy enough picture to paint. A surveyed customer rates their experience with you highly. But has it changed their frequency of purchasing, or the amount spent with you? Not necessarily.
The problem is that you’re looking at your company in isolation.
Your customer might be spending significant amounts on your products and services. But what if the amount spent with you is only a tiny amount of their total spend in this product or service category? You’re losing money, big time!
What if you discovered that although your customers are satisfied with you, they’re also regularly spending elsewhere on the same type of products? Your satisfied customers are lining somebody else’s pockets besides your own. And it may be much more than you think.
How it’s done
Calculating your share of wallet is actually relatively straightforward. The key aspect to consider is that you’re not only looking to measure your customers’ satisfaction with just your company. Your customers need to rate their satisfaction with the other brands or companies in the same category they spend money with.
Once your company and the other brands or companies have been rated accordingly, they’re converted into rank scores. Subsequent calculations with a straightforward formula will then identify the share of wallet for each customer. An average share of wallet can then be further calculated. Depending on the level of analysis required, this could be further split into different customer segments according to key variables.
Powerful stuff indeed.
What’s in it for you?
You’ll be in a prime position to not only see where your customers are spending their money on besides your own products and services, but also understand why your customers are doing so. From this you can identify how to reclaim wallet share and keep that money in your own coffers rather than with the competition.
If your customers are already spending nearly all of their discretionary income in this category with you, well done! Just make sure that the customer experience stays great!
If however, the majority of their spend is going elsewhere you know there’s work to be done.
Get in touch to discuss how identifying and understanding your share of wallet will help your marketing and sales efforts!