Market Share Versus Wallet Share

Last week we wrote about Baby Boot Camp. In that post we described how we were introduced and started working on their website, which is scheduled to launch in a few weeks. And we briefly mentioned a detour that came up along the way. Our side trip involved a series of strategic marketing planning sessions, and as we often do, the primary issue we discussed was focus. In this case the challenge could be described as market share versus wallet share.

Baby Boot Camp is a business that evolved over many years and found success through the national franchise sales model. In fact, their sales model was working so well the company had already created a second franchise business and was getting ready to introduce a third.

When business owners are looking for ways to grow their company it’s only natural to try and replicate what has already worked for them. In this case, the company had built a robust sales network comprised of entrepreneurial mothers – new moms with an appetite for risk and a desire to generate income during their childbearing years. In turn, the franchise owners developed strong networks of customers in their local markets – new moms that like to workout with their babies.

Over time the franchise owners started to experience the same thing as the founder of the company. As their babies grew up and went to school, the moms (who were fitness oriented women) wanted to keep exercising with their friends. But with their baby-rearing years behind them their needs had changed. So the company created a new fitness franchise business for women.

When we first met with the client we learned they were planning to introduce a third franchise business. This time they were zeroing in on the fitness needs of new moms before and after childbirth, which are less physical and more educational having to do with specific health issues that affect women’s bodies during and after pregnancy.

Each business was well conceived and had the potential for success on its own. They were all fitness-oriented. They all targeted a well-defined market. And the businesses were designed to tap into an established sales network. But the problem had to do with market share versus wallet share.

For an established business to sell more stuff they only have so many options. They can sell more stuff to the same customers. They can sell the same stuff to more customers. They can sell different stuff. Or they can sell stuff to different customers.

Let’s look at an example of a local, residential HVAC business. They can attempt to grow their business in several ways:

They can increase their service area (market share) by driving farther away from their home office or set up regional offices to serve other local markets.

Alternatively, they can sell related services to the same homeowners they already serve (such as plumbing, electrical, or appliance repair), thereby increasing their wallet share of each customer.

Either option presents unique challenges. Of course things like talent and competition must be considered. But from a marketing perspective it’s about the brand.

Market Share: How is the brand perceived in the marketplace? Is the brand well known? How difficult would it be to increase awareness in a different market?

Wallet Share: What kind of brand loyalty exists with the company’s customers? Do customers make purchase decisions based solely on price, or are they more concerned with the experience?

In Baby Boot Camp’s case, they made the decision to go from a local business to a national business years ago - hence the established national franchise sales model. In order to increase market share they have to convince more moms to try their service, take moms away from the competition, or expand internationally.

To increase wallet share, they have to introduce new products and/or services to their existing customers – hence the second and third franchise business offerings. Sounds good. But here’s the problem.

Building a brand takes a lot of time and money. When you multiply the challenges times two or three, it will invariably take two or three times the time and money. If you’re targeting the same market, and the same wallet, with related products and services, then why not extend your established brand, which will require less time and money, rather than try to build new brands?

If that weren’t reason enough, in the case of Baby Boot camp there were others. First, the vast majority of the franchise owners are very small businesses comprised of one or two people. As such they have limited resources. Asking those business owners to build and maintain more than one brand was daunting.

In fact, according to feedback from multi-franchise owners, many were struggling to stay on top of all the details. And the prospect of going from two brands to three was overwhelming. Think about it like this. If you own more than one business, and you’re the primary salesperson, then you represent more than one brand. That means you probably carry more than one business card, and you have to interview your prospect before you know which card to hand them. That’s crazy.

But wait, there’s more. One of the interesting things about fitness businesses, is they tend to form their own little communities. And in the case of new moms working out and spending time together, the bonds they form are especially strong.

Those strong relationships have the primary brand in common. All the more reason to extend that brand loyalty into related products and services and increase wallet share with existing customers.

In a few short weeks you’ll get to see the end result online: a strong, national brand targeting a well-defined market with multiple, related products and services. One brand is easier to promote (and defend) as the business continues to increase market share, and one brand will be easier to grow (and extend) by increasing wallet share.

Until next week,

Matthew Anderson, President
Milestone Marketing Associates, Inc.