Adding an extra item to every fifth order can drastically increase your profits. With access…
Interested in learning how much your customer spends?
Share of Wallet (SOW) is an important metric to measure how much of a customer’s purchase you’re responsible for. In other words, it reflects the amount of product or service purchased from your company compared with competitors. It can provide valuable insight into growth opportunities and areas where customers might be considering switching suppliers.
Growing your wallet share with existing customers is an efficient way to profitably grow your business. However, this means having a thorough understanding of their buying patterns – who’s purchasing what and when? By analyzing these trends over time, you can identify potential opportunities for increasing share of wallet. Understanding customer habits will help uncover gaps in spending which not only increases your share of their spend but is ultimately more convenient for your customer as well. Most customers would prefer to source from fewer suppliers, so you are helping their business by helping them understand the depth of your product lines.
Understanding a customer’s Share of Wallet is an essential metric for businesses to measure the proportion of their customers’ total spending that goes towards them. Companies calculate share of wallet in different ways, based on factors such as overall spend amount, product brand/category or geographical area. Getting accurate figures requires reliable sales management and analytics; however even estimations can give insight into your business positioning relative to competitors.
In distribution, customer retention is king. Increasing customer loyalty and boosting repurchase rates increases your share of wallet. Cherry pickers – those customers who only buy one or two products from your business – present a challenge in maximizing your share of wallet. A great way to break down these barriers is by educating yourself on their needs:
- what items are they currently buying off competitors?
- What kind of brand loyalty influences purchases and are there opportunities with competing brands?
- Are you offering simpler navigation around large catalogs for quick purchases?
- Does your customer understand what other value-added features you have compared with alternative suppliers?
SMP gives you powerful data insights and direct messaging capabilities to increase your customers’ loyalty and make their buying experience easier. It makes it easy to deploy numerous tactics directed at increasing share of wallet such as offering immediate discounts, personalizing messages based on customer profiles, providing employees access to transactional history for efficient decision-making, and generating reports and dashboards that illustrate new product opportunities. And all of this information is interlinked seamlessly with your ERP system.
Run Product Scorecards to Increase Purchasing Depth
Do you loyal customers know all about your complementary products? Only in the rarest of cases do customers buy most of their products from a single distributor. Discovering new opportunities for growth in customer spend can be a daunting task, yet as we’ve discussed above the strategies it unlocks are invaluable. An analysis of currently purchased products from you is simple and straightforward; however, scoping out what customers aren’t buying from your company presents much more difficulty – like trying to find an invisible needle hidden away in another business’ haystack. Not only does unlocking this potential drive revenue and profits higher, but also fosters deeper loyalty between supplier and consumer by providing solutions that may not have been previously known or considered part of your product line.
Improving your product mix with each customer involves much more than just analyzing which complementary products they might purchase together, although such an analysis is a good place to start. You need to understand your customer profiles so that you know you are comparing the right customers purchasing behavior. When you understand your customers segments, you can understand which customers buy products “A,” and “B,” together to generate a consistent and deeper analysis of who is buying product “A,” but not product “B.” If you’re not comparing the right customers to each other, it doesn’t matter if your report card shows a gap in their product mix because they may have much different motives for their purchasing behavior.
A distribution-specific CRM system can make this analysis much easier for you by tying your marketing and sales data to your ERP history. Here are some suggestions to point you in the right direction in your profiling:
- Basic Demographics. Start with some obvious demographic data like geography, line of business and company size. Grouping your customers in this basic way may show you some larger patterns in their spending habits.
- Revenue and Profitability. Next take a look at customers with similar sales and profitability levels. Compared to similar customers, is their sales volume going up or down? Does that trend match similar customers or is there a potential issue with that customer you might need to address. By running a year-to-date against a previous year-to-date analysis it is easy to identify those customers who are, for example, projecting to be at less than 100% of where they were last year. If a customer is down in one or more targeted product groups you can quickly identify at-risk customers.
- Customer History. Compare customers based on how long they’ve been your customer. It may take time to develop a level of trust with new customers regardless of your strength and depth in their industry.
- Purchasing Breadth. It can be helpful to analyze different customers beyond their basic sales figures but also based on the breadth of product they buy. Compare their recency (when was their last order), frequency (what is the rhythm of their purchases) and consistency (are their orders similar or all over the map). Some customers may take a long time between purchases, so it is helpful to analyze how many times particular items show up on their orders.
- Cost to Serve. Finally it is helpful to understand your cost to serve a group of customers. Is their average order size small or large? Do they take a long time to pay? Increasing your share of wallet with a customer can help defray the cost of each transaction by spreading transaction costs across a larger invoice.
Tactical Sales Activities Increase Share of Wallet
When you’ve identified the customers who offer the best potential for growth, it’s time to get tactically creative with your sales strategies. All too often though distributors allow their buyers to search through lengthy catalogs and websites unaided; making no attempt of simplifying the process or promoting their entire product line – leaving opportunities open to competitors. To stand-out from competition and capture greater market share, businesses need a proactive approach that encourages customer engagement while ensuring they are provided convenient access across all available products. The most successful distributors make targeted offers and enable effortless buying. If you haven’t made opportunities as clear as possible, some customers will continue to buy from your competitors because they don’t understand your entire product line and you haven’t made it convenient enough for them to switch.
This is why the SMP customer report card is so valuable. A report card is a high-level overview of their year-to-date purchases as well as a summary of their purchases from the previous year. This data is organized into the major product lines you carry. Running a report card is easy with SMP. You simply open the Customer Information Screen and run the “Report Card” report. Your sales reps now have valuable selling tool for their next customer visit in less than a minute. Your reps can easily start a conversation about your product lines, your customers’ needs and offer to quote for more of their business.
Robust and actionable data from SMP combined with messaging tools and our tight integration to your distribution ERP system can result in numerous opportunities to increase your share of your customers’ wallets. With SMP you can:
- provide immediate communication to customers when a particular discount or vendor rebate is available to extend the lines they purchase from you.
- create one-to-one messages based on your customers buying profiles
- provide your staff with data that makes their jobs easier, like transaction history from your back-end systems
- create reports and dashboards that identify new product positioning opportunities