Matt is an experienced B2B Loyalty & Incentive program designer with over 20 years working with Australian and New Zealand brands. Passionate about partnering with businesses to understand specific business and sales pain points, he takes a consultative approach to develop engaging solutions for customers that deliver measurable results.
“The grass is always greener on the other side.” It’s a cliched line, but it holds true that when markets become more competitive, reduced spending occurs, and everyone starts looking at sales results.
The availability of choice and promotional offers all try to sway a B2B customer’s decision about where to buy. When the pressure is on, it is easy to look over the fence to see what competitors are doing and try to replicate an offer. This is where a loyalty program with share of wallet objectives can help achieve sales goals.
Often, the easier path of discounting or promotions is chosen. But this chosen tactic doesn’t truly help sales results; reduced margins from promotions don’t necessarily make the increase in revenue that more impressive. For many B2B customers dealing with the ‘choice’ of where to spend, positioning your brand with long-term value against short-term promotions can be far more beneficial.
The choice of where to spend affects the Australian and New Zealand business markets differently. Cost-of-living pressures remain a focus, and the knock-on effect in the B2B market is different, so focusing on not only increasing your share of wallet but protecting what sales you have is critical to secure baseline profits and potentially gain growth, whether it has been forecasted or not.
It’s important to take stock of what your competitors are doing and look at how you can increase a customer’s share of your wallet, not by discounting, but by offering value linked to ongoing and frequent transactions, converting that value to recognition, and showing how your business loves that customer relationship.
In this piece, I’m going to explain share of wallet and break down some benefits of making this a design objective in a loyalty program. This can increase sales without additional advertising spend, sales teams’ time, and other acquisition headaches.
Let campaigns target competitors’ positions in the market but use the strategic design of a B2B loyalty program to move the share of the wallet and achieve greater gains.
Want to know how you can increase your customer’s share of wallet?
What is share of wallet?
Every day, customers are hit with a choice of where to buy and with which brands. Share of wallet (SOW) is a metric used to measure the percentage of total spending your company captures for a customer.
Share of wallet reflects how much of a customer’s total budget is spent with one you compared to their overall spending in that category with all competitors.
When considering every consumer’s choice each day, compare this to groceries, as supermarkets compete for weekly spending. Promotions, special offers, and advertising all serve to push your attention to specific brands as each of these businesses battles to earn your dollar.
For B2B, the challenge is similar and regularly factored into the program design of loyalty and incentive programs. This inclusion becomes even more critical when market conditions become more uncertain or when your competitors increase their activity in the market.
An economic downturn doesn’t necessarily lead to a huge decrease in customers’ spending, as these purchases are likely to remain part of any business relationship. The focus should be on how much is spent within your company.
If these purchases are likely to continue, what can you do to retain customers and entice repeat purchases without lowering your costs to beat competitors, and increase the share of wallet spend with your business?
As part of a B2B loyalty program, the aim is not just to reward a single transaction but to recognise customer ongoing spending and shift the value beyond that once off purchase into a build-up of benefits for both individual and business. Increasing a customer’s share of wallet is much more reliable and profitable than trying to acquire new customers.
Designing a program with share of wallet as a key pain point to solve addresses your pricing problem. These programs provide additional value to your customer base, creating a rewarding relationship between their continued transactional loyalty and future benefits goals on top of what your products or services already provide them.
Showing your customers what they can earn by continuing to do business with your brand gives them an incentive to focus on or favour your brand over competitors.
Loyalty programs aim to recognise customer spend and frequency and move the value beyond a one-off purchase in exchange for a secured long-term commitment. This encourages customers to stay with your brand and is much more profitable than attempting to acquire new customers.
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What can increasing share of wallet do for your business?
Share of wallet plays an essential role in your loyalty program design by allowing you to calculate and defend the program’s return on investment. This can even be calculated into a program dashboard (something we always do – trust us, it helps!). The benefits don’t end there – here are some additional outcomes you can expect with a well-constructed program:
By committing to protect your margin in a challenging market, you can ensure high returns to the business by gaining a higher share of wallet. This can then be returned to the customer through reward values, which allows you the flexibility of retaining your original prices while still demonstrating additional value and benefits to the customer without reducing anything. Maintaining your margins while increasing sales will enable you to extract the maximum ROI of your program – and ensure that it’ll continue to play an important role in your business moving forward.
Your program can serve as an important sales tool through continued promotion. By segmenting customers in the program, you can send targeted communications to your participants, keeping your product front-of-mind as they come due for their next purchase or when you notice that they’ve been absent from the program for a prolonged period. This allows you to save on new sales staff and marketing team members at a time when all expenses need to be considered heavily.
While it’s common knowledge that attracting new customers can be up to five times more expensive than keeping existing ones, shifting some of your customer acquisition resources to promoting your program can broaden uptake and potentially secure growth in a difficult time. By demonstrating the value and benefits that program participation provides your members, new customers will need to weigh this up against their existing purchases – and a well-designed program will present additional value over competitors.
Share of Wallet Strategies for Greater Loyalty
When considering share of wallet within a loyalty program design, you can consider introducing these elements overtime.
- Make sure your program has both soft rewards (special VIP access or status levels) and higher-tier service levels and customisations to increase its attractiveness and cater to a broad spectrum of customers. By making sure your program has something for every level of user, it can increase the perceived costs of switching at the point of purchase, enhancing the share of wallet gains.
- Similarly, provide a variety of rewards for your customers to choose from to account for individual preferences and maximise customer utility. By providing quality rewards for a selection of your customers, you can enhance the chance of catching someone’s eye with your program.
- Create a dedicated communications strategy focusing on motivators to shift the share of wallet spend. Keep purchasing habits and customer data in mind – the more you can tailor your communications, the more effective they will be.
With these important factors in mind, there’s only one question left to ask—what is your business doing to increase its share of wallet?
Looking to grow your share of wallet – we are here to help!
Reach out and chat about getting your brand front-of-mind and beating out the competition – we’ve been creating B2B loyalty programs for Australian and New Zealand businesses since 1996, so you can trust that we know what we’re doing.
