"Share of Wallet": A Powerful Tool for Channel Management

One of the most powerful tools I discovered while managing partnerships in the video surveillance sector was the “Share of Wallet” approach. Though industries may differ, the principles of this methodology remain equally effective across various partner ecosystems.

This concept helps businesses quantify their position with partners and identify growth opportunities. In this article, I'll share my experience with this powerful tool and how you can apply it to strengthen your partner relationships.

What is "Share of Wallet"?

Imagine hosting a dinner party where you've prepared an eight-slice pie for dessert. One guest eats only a single slice. This raises questions: Was the guest not hungry? Did they not enjoy your pie? To ensure they eat more next time, would you need to improve your recipe, or simply suggest they arrive hungrier?

In business terms, "Share of Wallet" represents the percentage that your product portfolio contributes to your partner's overall business in a particular segment. To continue our metaphor, it measures how many slices of their business "pie" your company currently occupies - and how many more you could potentially claim.

This concept is versatile and universal, applicable to anyone working with a channel ecosystem - vendors, distributors, and solution providers alike. Let's examine it primarily from a vendor's perspective.

Why Should You Track “Share of Wallet”?

Understanding this metric provides several strategic advantages:

Partner Selection: Accurately assess new system integrators (SIs) and distributors to identify those with the greatest growth potential

Business Development: Create targeted strategies to increase your portion of existing partners' business

Goal Setting: Establish realistic, data-driven KPIs for your channel program

Resource Allocation: Identify which partners are most critical to your business success so you can focus your attention appropriately

Brand Value Assessment: Gauge how important your products are to your distribution network

Churn Prevention: Recognise early warning signs when a partner might be shifting focus away from your offerings

With these insights, you can build more effective go-to-market strategies and develop channel plans that maximize revenue growth.

How to Calculate “Share of Wallet”

Depending on your business structure, you can measure “Share of Wallet” using either revenue figures or license counts.

Revenue-Based Calculation

If you know a partner's total annual revenue in your product category, you can easily calculate what percentage your brand represents. While partners may be hesitant to share exact figures, revenue data can often be obtained from external resources like annual reports or industry databases. I've primarily used revenue numbers to understand the overall size of a partner's business and assess our potential fit as a vendor.

License-Based Calculation

From my experience, partners are typically more comfortable disclosing how many product licenses they sell rather than specific revenue figures. At my company, the number of licenses was a critical indicator, so I focused on this metric rather than revenue.

It's also reasonable to narrow your focus to a particular division or product category for more meaningful insights.

Example

Let's say you sell accounting software and work with a partner who distributes three different accounting software brands:

The partner reports selling 10,000 accounting software licenses total this year

You know they sold 3000 licenses of your software during that period

Your Share of Wallet is therefore 30%

This percentage gives you a clear benchmark to measure future growth and compare performance across different partners.

Strategies to Increase “Share of Wallet”

There are fundamentally two approaches to growing your Share of Wallet:

Replace competitors - Convince partners to shift existing business from competing products to yours

Expand the overall business - Help partners identify and win new customers with your solutions

You can pursue either strategy - or both simultaneously - depending on the specific situation and partner relationship. Open-ended questions are invaluable for understanding which approach will be most effective with each partner:

"What factors determine which solution you recommend to your customers?"

"What would make it easier for your team to position our solutions?"

"What capabilities would you need to see from us to recommend our products more frequently?"

Understanding Realistic Limits

Even if you aspire to achieve 100% “Share of Wallet”, this goal may not be realistic - most partners diversify their portfolios and rarely commit exclusively to a single vendor. Diversification helps them meet varied customer needs and reduces their business risk.

If you do find a partner who primarily sells your solutions, focus on helping them grow their overall business and acquire more customers. Simultaneously, be exceptionally attentive and responsive to their needs, as they've become highly dependent on your brand's success.

Practical Tips for Implementation

New Partner Onboarding: The initial meeting with a new partner is the ideal time to inquire about their current portfolio structure and establish a baseline

Go Beyond the Numbers: Understanding the percentage is only the first step - you must assess why it is what it is and develop a plan to increase it

Practice Transparency: Don't hesitate to openly discuss that you use this metric as a tool for mutual growth

Extend Throughout the Channel: Encourage your distributors to use this tool with their SIs, and your SIs to use it with end users - in my experience, partners were often excited to learn about this valuable framework

Direct Communication: Simply ask partners, "What can we do to help increase our “Share of Wallet” with your business?" and collaboratively set growth targets

Conclusion

The “Share of Wallet” concept serves as both a powerful diagnostic metric and a strategic planning tool for channel management. By understanding where you stand with each partner and what opportunities exist for growth, you can make more informed decisions about resource allocation and partnership development.

Whether you're evaluating new partners, developing existing relationships, or planning your overall channel strategy, this approach provides the insights needed to increase revenue and strengthen your position in the market. Start applying this tool today, and watch your channel relationships - and results - transform.

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