What is Share Of Wallet (SOW)?
Share of wallet (SOW), also known as wallet share, is used to help gauge a company's competitive position. Share of wallet calculates how much of a customer's the percentage of funds or dollar amount a company receives from customers. A business with a high share of wallet takes a high percentage of the customer's spending, and therefore is a strong competitor within its industry.
Share of wallet can also be used in marketing strategies. Increasing wallet share can be a less expensive, more efficient and therefore more profitable way to boost revenue than expanding market share. For example, a bank might refer a wealth management client to a mortgage representative to buy a home or business. That kind of cross-selling within the bank can increase its wallet share.
Market leaders try to capture both wallet share and market share and share of wallet. The two terms are often used interchangeably - but incorrectly. There are significant differences between the two terms.
Calculation of Market Share
Market share is determined by dividing sales of a company by sales in its industry. For example, if Alpha Company sells $1 million in widgets to Beta Company, and that market has $10 million in sales, then Alpha has 10% of total market sales, or a 10% market share.
Calculation of Share of Wallet
Share of wallet is calculated by assessing what proportion of customer's money is spent on a company. To find this, divide customer purchases with the company by the total for all purchases within the same product or service class.
Share of wallet focuses on share of customer spending in a market, rather than overall sales in that market. In other words, one term looks at the share of customer; the other looks at share of the market. For example, companies that try to sell multiple products to customers, such as Apple or Levis, work to build share of wallet, as well as market share.