Share Of Wallet – How to Win Away Customers From Competitors
What is Share of Wallet (SOW)? It consists of the percentage of a customer’s spending on a product or service in a category at a company or organization. For example if a small business spends $200 per month on advertising for example $100 is spent on Google PPC campaign, $50 on website traffic and $50 on link building, then Google has a 50% of wallet share for that customer.
There is a competition in online world. Every business is searching for customers and how to attract them.
Many major player companies are pretty much aware of their overall market share based on sales volumes. However they need to prioritize their marketing efforts in order to win away their customers from competitors.
For companies such as: Google, Yahoo and Facebook, Share of Wallet constitutes the number of times customers buy their Pay Per Click and advertisement packages depending on their type of business and type of purchase. For a small business with low budget, their purchasing behavior is based on a short term advertisement. They spend a small amount of money and expect to see increase in sales. Medium sized companies, on the other hand, invest on a fairly bigger package such as: desktop and mobile advertisement in order to capture more sales. Then again this depends on the type of PPC ad management. Fortune 500 companies invest on classic advertisement such as TV , print media and online campaigns such as: broad PPC ads, while affiliate marketers target a specific type of advertisement for example: news feed in order to capture more leads.
What is the first step in increasing your share wallet?
In a competitive market customers have many options. One of your organization’s differentiators is using your company’s historical data.
Many companies’ customer relationship management (CRM), Enterprise Resource Planning ( ERP) or accounting system by default are designed to connect the customer data on daily basis. You have to see the patterns within your data in order to find the most loyal customers. Will this be enough? No. Continue to read.
Increasing share of wallet varies from company to company. However by locating the areas for improvement, your company can easily apply a unique strategy to maximize the share wallet.
– Targeting communication channels with customers
– Empowering responsive communication channels
– Identifying the most profitable loyal customers
– Deliver targeted relevant products and services at the right time across various communication channels such as phone, emails and classic advertisement
How to identify loyal customers when it comes to increasing your share wallet?
For companies such as Google and Facebook, increase in share wallet depends upon their current customers who most likely upgrade their PPC advertisement. For example: your company should predict when a customer is likely to leave and which customer is not worth your time and money. In sales, I recommend not to spend much time on customers who postpone their purchase in cold calling, rather than use your time on those prospects whom likely will buy the product.
We call such prospects “fence sitters“. These are people who can be tempted with your discounts and special attention. They will be your customers.
It is significant that you do not spam people via cold calling and or email marketing. It will not only turn them off from your product, but also will hurt your company’s reputation.
By taking care of your loyal customers who use your services on monthly basis, you can focus on acquiring new customers. However you may cross sell to the existing customers when the right time comes. Make sure not to attempt to cross sell right away after making the first sell, it will not work. Be patient!
You should also explore who would be receptive to upgrading to a better plan, account type, or a different product of yours.
Make sure to monitor your customers’ behaviors for example: find out which one is about to end their contract with your company and why.
The importance of Customer Service
In my book “The Surprising Truth About Sales” I have emphasized on the significance of customer service along with sales strategies and tactics online and offline.
An understanding of your customers’ behavior towards your products or services, through analytic, empowers all functions across your organization. If you deliver the right level of customer service, you will increase sales of your products per customer and as a result you will maximize profits. You must have an effective customer acquisition for targeting loyal, attractive and profitable customers.
Which prediction model can help your organization? Multinomial Logistic Regression.
Why should you apply multinomial logistic regression when it comes to increase in share wallet?
By applying this mathematical model, you can predict future customer behavior. Multinomial logistic regression is a logistic regression to multiple cases.
• Which product a customer will purchase with a particular demographic characteristic?
• Which customer will subscribe to new product, given their earlier purchase from your company?
In this model each independent variable has a single value for each case. We predict a binary response from a binary prediction.
X where Xi is the vector of explanatory variables describing observation i. βk is a vector of weights corresponding to outcome k, and score(Xi, k) is the score associated with assigning observation i to category k. (source: Greene, William H., Econometric Analysis, fifth edition, Prentice Hall, 1993: 720-723.)
If you run a company with more than 2000 customers, you can use it in order to determine the future purchase.
A great customer experience is achieved by providing the right customer service. Based on my experience every country has a different approach in customer relationship depending upon niche, geographical situation and the size of a company.
Facebook does not provide a good customer service for their free products, while at Google you will see slightly different attitude. You get reply but the reply is a copy and paste cliche text with a signature without a name at the end.
Based on my finding and testing, smaller size companies either do not reply in inquires for their free products or if they reply, they are done by humans who answer the question efficiently.
Companies that do not take customer relationship seriously miss sales opportunities due to their faulty customer service. These companies are missing the opportunity to cross sell and up sell.
95% of companies’ customer service departments both on the phone and via email have bad manners. For example: customer service at the most Russian companies are rude and provide insufficient data/information when customers ask questions about their products. They answer short and obscure which makes customers to keep asking the same question in several sessions until they get the right reply. In North American companies, on the other hand, customer service departments are fairly polite and provide the right data to their customers/clients. In Europe, countries in Scandinavia, Germany, Italy and Spain are both polite and provide semi complete data to their customers. The length of sessions will extend to 3 emails until customers get what they need to know. Please note that this is a general classification which may vary from company to company in Europe and North America. In Francophone countries they provide the answer between two to three sessions.
Greater companies have an out of control inquires at their customer service department which needs to be improved.
Bad customer service will turn off prospects who are ready to become their clients. This will hurt a company’s future sales.
When you operate a business, it is important to have an insight about a customer’s earlier purchase. This is why CRM system can be a great tool. If you do not remember what a customer acquired earlier, it may be a red flag for your company. So having a record of purchases and data of each customer is important. Small businesses should pay attention to this part of their business.
Another aspect of customer service is training. Keep them up to date.
Update your data in order to run a prediction.
Is having a loyal customer enough to increase your share wallet?
In the competitive market just having a loyal customer is not enough. Your product should stand out otherwise your customer will buy from your competitor. Another aspect is pricing, sometimes you have to compromise in order to increase your company’s ranking. By decreasing your pricing, you will gain a few percentages. Because your customer sees no reason to go to your competitor and buy from their company.
In order to increase your share of wallet, you need to run a survey in order to explore where you can acquire rich customers with less spending on marketing and advertisement. Companies do not know how much their competitors are making per customer. You have to find out what would be the total spent for each customer.
There is no correlation between what your company spend inside and what your competitors spend. So the only way to target this information properly is to get the data via applying a regression analytic.
You should find marketing opportunities and use classic advertisement. If you are a distributor, the best way is to call companies with lower share wallet. Make sure to partner with companies who add more value to your product with their product or service. For example: if you run a hotel, then send ads to companies who have several kick offs a year in foreign countries or other cities in your country. Partner with them so they use your hotel for their banquets, conferences and arrangements. If you run a real estate agency, run your ads among companies prior to vacation seasons such as: Christmas and summer, so they rent a timeshare at your agency.