Why “Share of Wallet” matters

I’ve written previously that the understanding of “Wallet” depends on audience, and discussed various definitions of “Wallet” here. The share of “Wallet” discussed in this post is NOT digital, mobile or self custodial wallet related. Intrigued?

Share of wallet is the share of spend/budget that a customer spends on goods/services with a business. Simplified examples:

  • Software: If the business customer spends $10,000 on project management software, how much is going to Atlassian vs Asana vs Notion? If $8,000 goes to Atlassian, then Atlassian has 80% share.
  • Payments: If a customer routes 80% of their payments volume to payment partner XYZ and 20% to payment partner ABC, then payment partner ABC has 20% share of wallet.

I’ll discuss three reasons why “share of wallet” matters:

  1. Share of wallet is how you actually monetize
  2. Share of wallet helps you to benchmark to competitors
  3. Share of wallet helps you understand growth levers better

*“You” refers to a business selling its software/services. I focus on B2B sales, but “Share Of Wallet” applies to B2C scenarios too. More here [1]

Designstripe

1/ Share of wallet is how you actually monetize

Winning company logos is a good effort and a tiny step in the right direction. However it is a vanity metric — a nice headline, tweet, blogpost, but meaningless towards whether your business is actually monetizing.

For example, if a merchant has payments processed volume of $XXM, but <5% of spend goes to a payment provider, that means that payment provider is not making much revenue. Ideally, there is a clear plan to get to 20%, 50% share of wallet etc, to earn more revenue, vs being content with the <5% share of the wallet.

2/ Share of wallet helps you to benchmark to competitors

Winning the same logos as your competitors feels good. However, it is more interesting to see one’s share of wallet vs competitors. Is your share of wallet steady, growing, or decreasing?

Word of caution: This is not a recommendation to obsess about competition (more here on competition). Share of wallet does not have to be discussed daily, weekly or even monthly. But if one does not know what the rough share of wallet one has of a customers’ total spend at a ~6 month to ~1 year cadence, that’s worrying.

If a company has the best product, its share of wallet should be steady (if it started high) or growing (if it started lower).

3/ Share of wallet helps you understand growth levers better

Why is a customer spending more on a product? Usage could be growing (good), that could be because one’s customer’s business is growing organically, and nothing to do with your product. For example, a customer buying more seats of a messaging product, because they have more headcount.

It’s not a bad thing that your customer’s company is growing, and of course we want customers to be high growth companies who buy more licenses. However, to understand what the specific levers driving the spend changes, one needs to dig deeper (perhaps with the customer success team) on what’s happening, why, what specific product attributes/features might be driving this.

Know your share of wallet, even if knowing hurts

The truth sometimes hurts, and having a paltry or shrinking “share of wallet” can be the bad news that no one wants to hear. Or you might assume that the customer is only using you and your share of wallet is 100% (if truly the case, that’s good!). Perhaps you don’t know who the decision maker who could influence an increased share of wallet [2].

However, hard truths are good for growth. You don’t have to start with 100% share of wallet, but knowing the baseline and then measuring performance over time helps. If your share of wallet is <50%, having a plan to increase is a start.

[1] In the B2C scenario, a brand could have a customer’s loyalty, but the key part is understanding how much a customer would spend on that brand vs a competitor. For example — how grocery spend might split between several brands See HBR article here.

[2] More here on finding the decision maker

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Musings are my own: a collection of learnings from Payments, Go To Market, Web3, Biz Ops across Stripe, Coinbase, Twitter.

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Celine Wee

Musings are my own: a collection of learnings from Payments, Go To Market, Web3, Biz Ops across Stripe, Coinbase, Twitter.