Even before the pandemic hit, companies were putting a lot more focus on revenues from existing customers. Given the high cost of acquiring new customers, it’s a smart investment. But what is the best approach? ABM – sure. Cross-sell/up-sell – you might want to rethink that. Wallet Share may the better way to go.
HITMC recently sat down with Eric Meerschaert, Executive Director at Studio North to learn more about Wallet Share and why it has generated better results for them vs traditional cross-sell/up-sell techniques.
Wallet Share Defined
According to Meerschaert, Wallet Share (or Share of Wallet) is an approach that is designed to “get the highest possible share of each targeted customer’s wallet”. In other words, it is the amount that a customer could reasonably spend with you.
Consider the following example: Organization A spends $100K each year on print advertising. Print-Ads-R-Us gets $25K of that $100K each year. That means, in theory, that Print-Ads-R-Us has only 25% wallet share. Knowing that could motivate their sales/account team to spend more time with Organization A to secure a greater % of their annual spend.
Meerschaert shared an example of one of their own clients, a large national wholesaler. This wholesaler believed they owned about 60% of their customer’s wallets and were happy with their performance. However, after doing a more thorough analysis and looking at the average of the sector, it turned out the wholesaler owned only 30% of their customer’s wallet. Studio North essentially unlocked the potential for over $100M in additional business.
Wallet Share vs Cross-sell
For many companies, generating additional revenue from existing customers means selling them additional products and services that they have not already purchased. This is the essence of “cross-selling”.
“Cross-selling tends to say: if I’m buying this product why not offer me THAT product,” explained Meerschaert. “That’s a product-at-a-time or sales-objective-at-a-time approach. Whereas Wallet Share sets an objective for us to sell towards. For example, customers of this type, ought to be spending $250K. That is the objective we would constantly strive for.”
Cross-selling is not a bad tactic, but it is very seller focused rather than customer focused. Wallet Share, on the other hand, forces you to “get into the mindset of your customers” and understand where they are spending and why they are buying what they buy. This deeper understanding helps unlock more revenue opportunities.
Why now?
In a landmark 1990 study by Bain & Company – “Zero Defections: Quality Comes to Services” – they found that a 5% increase in retention revenue translated into 25-95% increase in profits. This study was conducted before the meteoric rise of online ad spending on Facebook and other social platforms and intense global competition.
Recently, Hubspot released their customer acquisition guide which showed “the cost of acquiring new customers has increased 60%” in the last six years.
Combine these two studies with the current economic uncertainty, and you end up with a business environment where focusing on existing customers is not only prudent, it’s key to survival.
“Existing customers already know you and trust you,” said Meerschaert. “It just makes sense to dedicate more time to people you have a relationship with and understand their needs better. Higher profit is certainly one motivation, but competition is another. Somebody is going to own your customer’s wallet. If that’s not you then it’s going to a competitor.”
Getting Started
Meershaert recommends starting simply with Wallet Share: “Take a subset of customers and do a really quick, simple analysis. I would compare how much I sold to the size of the company. I would compare how much I sold to the industry.” The customers that fall under the average on both comparisons are potentially ones where % of wallet share is lower than it should be.
That analysis can be the start of a conversation with your CEO or CRO (Chief Revenue Officer).
Watch the full interview with Eric Meerschaert to learn:
- How Wallet Share and Account Based Marketing (ABM) are complementary
- Why Wallet Share is a better way to think vs “customer retention”
- How to convince senior leaders to back a Wallet Share pilot program
- What “outliers” in your customer analysis may be telling you
To find out more about Studio North visit their website.
TagsABM Account-Based Marketing cross-sell Customer Retention Eric Meerschaert StudioNorth up-sell wallet share
