Have you ever seen an ad on television or online offering a free month of service or specialty product for new customers signing up to a company you have been loyal to for years? How did it make you feel as a customer? Did you start looking at the competition to see if they could give you a better deal? Research suggests that companies that reward and concentrate on increasing the business of their existing clientele spend five times less than focusing on getting new clients in the door. There are some companies that help increase wallet share by doing an analysis of a business and areas of improvement.
What is wallet share?
When discussing how a company can increase its share of wallet (SOW), it is important to understand what that phrase means. The best way is with an example. The company in question sells grooming services for pets. A market research survey suggests that pet owners spend $100 a month on grooming. The company’s own sales figures show their customers spend an average of $25 a month on their service. This means that the company has 25% of the market share. The key to making this number work is to see how many competitors there are in the market. If there are three competitors then the other two are sharing 75% of the grooming market and the company in question is at 25%. There is definitely room for improvement. If there are 50 competitors and the business is 25%, then that company is doing a great job and can only improve its share of wallet.
Strategies to increase share of wallet
There are some strategies to help you increase your wallet share on your own or with the help of a third party.
Rewarding existing customers
Referring to the example in the first paragraph, the service companies are missing a great opportunity to increase the services of loyal customers by offering better incentives to new businesses. As a long-time customer, wouldn’t you want to feel appreciated for your loyalty? Surveys, rewards, and coupons are just some of the simple ways a company can generate repeat business and gain new customers through word of mouth.
Get involved in the community
This strategy is not as straightforward as some of the others but can be one of the most effective long-term. If you are a niche business and serve a very specific community, getting involved in events like festivals, charities and health drives is a great way to build on the relationship you have with your community, and when existing customers see that, they will look to you for future needs. This is an ideal way of getting new business too.
Add-ons and value selling
If a company sells a service, then offering a free month to existing customers or a specialty service they might enjoy goes a long way to building a business on existing business. The customer is more likely to keep the service at the full price after the promotional period expires and they may add others. Value-selling customers additional services they need or offering benefits like points and rewards will keep the existing clientele loyal.
These programs reward customers with points or benefits based on how much they use or purchase. These programs offer a great incentive to make more purchases.
These are a few examples of how a business can increase its share of wallet. Speaking with a professional in this area or doing some research can help come up with the strategies that work best for the type of business that wants to increase share of wallet.
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