What does the concept of 'share of wallet' refer to?

The concept of 'share of wallet' refers to the percentage of a customer's total spending that is allocated to a particular brand or company. This metric is crucial for businesses as it helps them understand how much of a customer's overall budget is being directed towards their offerings compared to competitors. By analyzing share of wallet, companies can identify opportunities to increase customer loyalty and encourage larger purchases, informing marketing strategies and overall business tactics.

This approach differs from just understanding total spending or loyalty. While total amount spent by a customer is about the aggregate expenditure without specifying brand allegiance, customer loyalty pertains more to the emotional or psychological commitment a customer has, which may not always translate to share of wallet. Similarly, knowing the number of products purchased doesn't provide insight into how much of the total budget is represented by those purchases or how much could potentially go to another brand. Hence, focusing on share of wallet offers a more strategic view of customer behavior in relation to spending.