What is 'Share Of Wallet (SOW)'

A share of wallet (SOW), also known as wallet share, is a marketing tool used to calculate how much of a customer's cost for a product or service goes to a specific company. Increasing wallet share is a more natural, less expensive, and more efficient way to boost revenue than expanding the market share would be.

BREAKING DOWN 'Share Of Wallet (SOW)'

The share of wallet (SOW) is used by analyst use to reference market share and competition. A business with a high share of wallet has a higher percentage of the customer's wallet. But what exactly does this mean? First, it is relevant to understand the wallet referenced is the customer's wallet. It refers to the number or dollar amount of sales the company is taking from the customer's wallet. 

More broadly SOW is used to describe a company's position in the marketplace, which is often confused with market share. Increasing wallet share can be a profitable strategy. For example, a bank might refer a wealth management client to a mortgage representative to fulfill other needs. By cross-selling, the within the bank structure, they can increase their share of the customer's wallet.  Market leaders try to capture both market share and share of wallet. However, there is a difference between the two terms.

Calculation of Market Share

Market share is often confused and used interchangeably with the share of wallet. This confusion is because both describe a company's positioning within the marketplace. Market share is determined by dividing company sales by sales in the entire market or industry. For example, assume company Alpha sells $1 million in widgets to company Beta. The total of all sales in that market is $10 million. Company Alpha has 10% of the total market sales, or a 10% market share ($1 million/$10 million).

Calculation of Share of Wallet

Calculation of share of wallet is by how much the customer spends with a particular company. To find this, you will divide the customer's purchases with the company, by what the customer spent in total for all purchases within the same product or service class. 

This approach defines market share from an internal perspective. Instead of looking at the share of total expenditures in the market, which is going to be small for new or small businesses, the share of wallet narrows the universe. SOW focus is on customer expenditures. In other words, one term looks at the share of the market, while the other looks at the share of customer. For example, if a customer spends $100 per month on fast food and $20 of that total is spent at Burger Palace, then Burger Palace has a 20% wallet share ($20/$100=20%).

RELATED TERMS
  1. Bitcoin Wallet

    A Bitcoin wallet is a software program where Bitcoins are stored. ...
  2. Mobile Wallet

    A mobile wallet is a virtual wallet that stores payment card ...
  3. Ledger Wallet

    Ledger wallets are hardware devices that enable offline cryptocurrency ...
  4. KeepKey (Cryptocurrency)

    KeepKey is a hardware device that offers secure storage for your ...
  5. Coinbase

    Coinbase is a bitcoin broker that provides a platform for traders ...
  6. Stealth Address (Cryptocurrency)

    Stealth addresses hide the identity of the receiver of a blockchain ...
Related Articles
  1. Tech

    What are the Safest Ways to Store Bitcoin?

    As Bitcoin and other cryptocurrencies expand, hackers see new potential for thefts. How do you keep your digital investments safe?
  2. Tech

    Best Ways To Protect Your Bitcoins

    Just like any other valuable asset, its important to keep your bitcoins safe. Here are few ways to protect bitcoins from threats like computer failures, loss of passwords, and hackers.
  3. Personal Finance

    What To Do If You Lose Your Wallet

    Here's a step-by-step guide of what to do if your wallet is lost or stolen.
  4. Tech

    How to Buy Bitcoin

    It's one of the biggest buzzwords in the financial space, but many people don't know how to buy Bitcoin.
  5. Tech

    How To Give Bitcoin As A Christmas Gift

    What other gift is both an investment and also a medium of exchange?
  6. Tech

    Beware of these Five Bitcoin Scams

    We look at five bitcoin scams and how to protect yourself from fraud.
  7. Tech

    Second Major Ethereum Hack In a Week Leads to $34 Million Theft

    Ethereum suffered two high-profile hacks in a span of just a few days.
  8. Tech

    Mobile Payments Could Replace Cash By 2016

    Could paper money be replaced by mobile payments in the near future?
  9. Tech

    One-Third of Cryptocurrencies Are Unspendable

    Although the term "cryptocurrency" suggests that tokens are spendable, they may not be.
  10. Investing

    Target Introduces Its Own Mobile Payments Platform

    Target (NYSE: TGT) recently launched a mobile payments platform by adding a "Wallet" feature to its app. In-store shoppers can now check out using the app, and redeem Cartwheel coupons and discounts ...
RELATED FAQS
  1. What is the difference between authorized shares and outstanding shares?

    Calculating financial ratios can help investors understand a company's financial position, but only when a knowledge of various ... Read Answer >>
  2. What are the main income statement ratios?

    Learn how to calculate and interpret some of the most common and insightful financial ratios, like earnings per share, from ... Read Answer >>
  3. How is a company's stock price and market cap determined?

    A company's market cap is represented by its outstanding number of shares multiplied by its stock price, which is initially ... Read Answer >>
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center