What is Share Of Wallet (SOW)?
Share of wallet (SOW) is the dollar amount an average customer regularly devotes to a particular brand rather than to competing brands in the same product category. A marketing campaign may have a stated goal of increasing the brand's SOW at the expense of its competitors.
[Important: Increasing market share means boosting a brand's total sales within its category. Increase share of wallet means increasing spending on the brand by existing customers.]
How Share of Wallet Works
Increasing wallet share can be a less expensive, more efficient and therefore more profitable strategy for boosting revenue than attempting to expand overall market share. The two terms are often confused. Market share refers to a product's overall percentage of sales in its category. Wallet share focuses on a brand's existing customers and seeks to maximize the dollars they spend regularly on that brand rather than on a competing one.
For example, when McDonald's added a breakfast menu, some customers may have started stopping by one of its stores in the morning rather than at Dunkin' Donuts. McDonald's had captured a few more of those customers' dollars spent on fast food. Then, Dunkin' Donuts expanded its menu to include egg sandwiches, possibly in order to lure back some of those breakfast customers.
Or, a bank might step up its cross-selling efforts. A wealth management client is referred to an in-house mortgage representative when in the market for a new home. A checking account customer is encouraged to apply to the bank for a car loan. The bank is not winning new customers but it is increasing its share of wallet among current customers.
Neither McDonald's nor the bank has necessarily added new customers. It has, however, increased the spending of its existing customer base on its products rather than those of a competitor.
Special Considerations on Share of Wallet
A campaign to increase a brand's share of wallet focuses on competing more effectively to take away some of a competitor's business.
Such a campaign might begin with an attempt to identify exactly what a customer finds at a competitor. It may be a broad issue of quality, price, or convenience, but it may be very specific. A competing grocer might have more vegan selections or superior fresh produce. It may have faster checkout or free delivery.
Increasing share of wallet can mean adopting a competitor's best ideas.
It also might mean identifying goods or services that are a logical extension of the business but can increase its share of wallet by supplanting rivals. The Wegmans supermarket chain carries all of the usual grocery items, but its vast ready-to-eat section may be its true share-of-wallet extender. Its selections compete against every takeout restaurant between its store and the customer's home.
- Share of wallet is a marketing term that focuses on the percentage of its customers' spending that goes to a particular product rather than to a competitor in its category.
- A marketing campaign might focus on increasing spending by existing customers rather than increasing the product's overall market share.