When I began my career in marketing and sales more than 25 years ago, my first job was helping a financial services firm retain customers and grow its share of the customers’ wallet. This was long before customer relationship management was popular and before the advent of CRM and SFA systems. Today we definitely have more sophisticated ways to understand who our best customers are and what we need to do to keep them satisfied. While my work has covered all aspects of marketing, I eventually return to keeping customers and growing customer value.
That holds even today, where companies tend to focus more on customer acquisition. If you have customers, it pays to invest in retention and growing your share of the customers’ wallet. Consider one company I worked with, which was already the worldwide leader in its particular industry with 60 percent of the market share. For all practical purposes, the business had only one primary competitor. Everyone already knew and bought from both of the companies. The rub was that my customer was in a market that had only about a 2 percent compound annual growth rate, and the challenge was to grow at least four times faster than the market. So how and where does a market leader who is already doing business with everyone achieve this kind of growth?
There’s only one way. And that is to increase the footprint inside the existing customer base. Before you can increase your footprint, though, you need to understand which of your customers offers the best opportunities for growth. The way to learn this is to conduct a share of wallet study. And that’s exactly what this company asked us to do. The aim was to answer these key questions:
- Were its customers spending more on the competitor’s products than on its own products? If so, which customers were doing so, and how much were they spending?
- What was the share of preference? That is, how much preference did these customers have for my client versus the competition?
- How loyal were these customers, and how likely were they to buy more from my client or refer my client internally?
Almost any company can benefit from knowing this information about its existing customers, and by knowing this information, you can improve your value to customers and gain additional insight into their needs and preferences. This kind of information is also critical to creating a model for account planning and establishing important performance metrics for both marketing and sales. The ultimate goal of a share of wallet (SOW) initiative is to invest in those activities that increase the likelihood both that your customers will do more business with you and that when the time comes to select a product or service, it is yours they choose.
‘Almost any company can benefit from knowing this information about its existing customers.’
My customer specifically wanted to better understand the current and potential share of wallet among its customers, as well as how brand preference and loyalty affected customer purchasing behaviors. Executives also wanted to develop a set of customer-centric performance metrics. Many of the metrics they tracked before I took on the assignment focused internally on marketing operations. While the metrics were designed to make the marketing group more efficient and effective, the majority of metrics were backward-looking and not necessarily outward looking. The marketing organization wanted external customer-related metrics that would complement its well-developed internal metrics efforts. In addition, marketers wanted to create a baseline Net Advocacy Score and benchmark this score against competitors as a driver to continuous improvement.
If you have the same needs, you, too, can use the seven-step process I helped my customer deploy:
- Score your customers on some key criteria. We generally recommend criteria such as profitability, tenure, recency and frequency of purchase, number of potential buyers and previous spend history (is customer spending going up or down?).
- Use your scoring methodology to rank and segment your customers.
- Design a study using an interview methodology. Be sure to take a customer-centric perspective when creating the discussion guide, and be sure answers to the questions will result in your ability to create customer-centric metrics.
- Conduct interviews with as many customers as you can from each of your segments.
- Analyze the data to determine the answers to your questions and to compare the difference in the answers between the different segments.
- Use the data to establish your performance metrics and a benchmark.
- Develop an action plan based on the data.
Upon completing these steps, this company was able to determine its share of wallet, Net Advocacy Score and the average number of products typically used by a customer in each of the segments. It also gained additional insights into each of the customer segments.
As a result, the company was able to identify the accounts that were most likely to increase budgets and their spending and, so, help develop strategic account plans based on real account feedback. The company also was able to profile the ideal customer account, identify indicators of accounts at risk and develop plans of action for recovery. This eventually meant that my client could decide how to best allocate its resources and facilitate conversations with operations, sales and customer service.
By conducting a SOW Study, your company can identify the most critical factors to your target buyers when purchasing your product and gain a new and more developed understanding of your competitive advantages and the places you need to focus your efforts for improvement.