The Growth Opportunity Already Within Your Customer Base

At a time when acquiring new customers is becoming increasingly expensive, many companies are discovering a more efficient source of growth: increasing their share of spending among the customers they already have.

The concept is known as Share of Wallet (SOW) and measures the percentage of a customer’s total category spending that is allocated to a particular company. The difference between being one of several suppliers and becoming the preferred provider can have a significant impact on business performance.

“The question is no longer how much a customer buys from us. The question is how much more they could buy from us.”

The opportunity is substantial.

Numerous studies show that deepening relationships with existing customers often generates higher returns than customer acquisition efforts.

From a commercial perspective, the challenge is identifying what portion of a customer’s spending is currently being captured by competitors.

Imagine that the top 20% of a company's customers distribute their purchases across multiple providers. If the company were able to capture a larger share of that spending and become their primary supplier, it could potentially increase revenue by approximately 5%—without acquiring a single new customer.

“Small increases in share of wallet often generate disproportionately large impacts on revenue.”

The explanation is straightforward: in most businesses, a relatively small group of customers accounts for a significant share of sales. As a result, expanding relationships with that segment is often one of the fastest and most profitable ways to grow.

Increasingly, companies are complementing traditional market share metrics with wallet share indicators. While market share measures a company’s position within the broader market, share of wallet reveals how much growth potential remains untapped within the existing customer base.

“Before looking for new customers, it is worth asking how much business is still being captured by competing providers.”

In an environment of tighter margins and growing competition, Share of Wallet has become one of the most valuable metrics for understanding where the most immediate growth opportunities lie.

Every retailer faces different challenges. If you would like to explore how to increase the share of wallet of your most valuable customers—and what impact that could have on your business growth—let’s talk.

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Sources

• Bain & Company (2001). The Value of Keeping the Right Customers. Research showing that a 5% increase in customer retention can increase profits by 25% to 95%.

• Keiningham, T., Aksoy, L., Buoye, A., et al. (2015). The Wallet Allocation Rule: Winning the Battle for Share. Journal of Marketing.

• Cooil, B., Keiningham, T., Aksoy, L., & Hsu, M. (2007). A Longitudinal Analysis of Customer Satisfaction and Share of Wallet. Journal of Marketing.

• Gupta, S. & Zeithaml, V. (2006). Customer Metrics and Their Impact on Financial Performance. Marketing Science.