Share of wallet
The calculation is easy, sales over total wallet, the problem is in defining the denominator, or what is in/out of your wallet.
The definition of the wallet is the really hard bit, the debate however, can be extraordinarily useful in terms of focussing the attention of the enterprise on the immediate and longer term priorities, and how those priorities are to be addressed.
Markets can be broken up in as many ways as imagination allows, but often for me it has been useful to break it into three.
Target market. The immediate markets where you need success in order to pay the bills.
Adjacent markets. Those market segments around you that would benefit from your solution, in the event that you were able to create and deliver that solution.
Generic market. The wider market that many consider as ‘The market’.
Lets take the insurance market as an example, as there are plenty of current examples around.
The generic market is, pretty obviously, ‘Insurance’.
Insurance companies are seeking to deliver services in increasingly specific niches, and are often creating apparently separate businesses to do so, although they are really just brands.
NRMA for example started with car insurance, and under that brand also deliver, home, contents, and other types, obviously leveraging their marketing reach to homeowners. Under different brands, CGU, SGIC, and others they also deliver competitive personal products as well as more specialised ones. Similarly, Suncorp delivers a range of products under a host of brands, AAMI, APIA, Bingle, Shannon’s, GIO, and others, many of them overlapping and directly competitive.
If you happen to be the marketing manager of “Shannon’s” car insurance for car buffs, does your wallet include the adjacent market of home insurance for said car buffs?
The arguments for and against are obvious, the temptation to lose focus on the primary target market equally obvious.
For many small businesses there is also a geographic component.
One of my mates runs a café in Burwood, and having this debate with him is instructive.
How does he define his wallet between coffee consumers in Burwood and the adjacent suburb of Croydon, and between individual consumers in those suburbs Vs businesses to whom he offers simple “sandwich catering” to order. The manner in which he spends his limited marketing budget, the sort of offers he makes, and the staffing he employees are defined by the answers to the questions.
Defining your wallet is a fundamentally important process, give it due care and attention.
