Share of Wallet

Measure relationship depth by tracking what percentage of customer spend you capture versus alternatives

Dan Hockenmaier
Developing a growth model + marketplace growth strategy

Share of Wallet

"If you could tell me we could grow GMV 10% by getting 10% more customers or by getting 10% more of our current customers' wallet, I would take the latter because you now have a deeper relationship with them." - Dan Hockenmaier

What It Is

Share of wallet measures how much of a customer's total spend in your category goes to you versus alternatives. It applies to both sides of a marketplace:

  • Buyer side: What percentage of their total category spend comes through your platform?
  • Seller side: What percentage of their business revenue comes through you?

This metric matters more than raw volume because it indicates relationship depth and predicts future retention and defensibility.

How It Works

Measuring Share of Wallet

For Buyers:

  • Faire example: If a retailer stocks their store with products, what percentage of their shelf came from Faire versus other wholesalers?
  • Uber example: If a rider takes 20 trips per month, how many are on Uber vs Lyft vs other services?

For Sellers:

  • Uber drivers: If they spend 40 hours driving per week, how many hours are on your platform vs competitors?
  • Marketplace sellers: What percentage of their total sales comes through your marketplace?

Why Depth Beats Breadth

Higher share of wallet delivers three advantages:

  1. Higher LTVs: More spend = more revenue per customer
  2. Less multi-tenanting: Customers consolidate to fewer platforms
  3. Stronger defensibility: Harder for competitors to displace you

The Multi-Tenant Risk

When share of wallet is low, customers easily use multiple services simultaneously. A driver who does 10 hours/week on each of three platforms has no loyalty. A driver doing 40 hours/week on one platform is committed.

How to Apply It

  1. Define the Total Market

    • Identify what "total spend" means for your customers
    • Be specific about the category boundaries

  2. Measure Current Share

    • Survey customers about total spend
    • Use data proxies where possible
    • Track changes over time by cohort

  3. Choose Your Leverage Point

    • You often can't drive high share of wallet on both sides simultaneously
    • Decide which side to prioritize based on where you can win

  4. Build Features That Increase Share

    • Make your platform the path of least resistance
    • Create switching costs through better service, not artificial barriers
    • Solve more of the customer's adjacent problems

When to Use It

  • Marketplace health assessment: Beyond GMV, how deep are your relationships?
  • Competitive positioning: Are you the primary platform or one of many?
  • Growth strategy: Should you focus on more customers or more from existing customers?
  • Retention analysis: Higher share of wallet typically predicts better retention

Key Insight: Depth Over Breadth

"Share of wallet is basically a measure of depth rather than breadth. And I will take depth every time in a marketplace."

The temptation is always to chase new customers. But 10% more wallet from existing customers often creates more value than 10% more customers because:

  • It signals stronger product-market fit
  • It increases switching costs
  • It compounds through better retention
  • It reduces multi-tenanting

Cautions

  • B2B vs Consumer: Share of wallet is cleaner to measure in B2B where spend is tracked. Consumer marketplaces may need proxies.
  • Supply side always measurable: Even consumer marketplaces typically have business-like entities on supply that can be measured.
  • Don't optimize share at expense of market size: Growing share in a shrinking market isn't winning.

Source

  • Guest: Dan Hockenmaier
  • Episode: "Developing a growth model + marketplace growth strategy"
  • Key Discussion: (00:30:41) - Share of wallet as a key marketplace metric
  • YouTube: Watch on YouTube

Related Frameworks

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