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Definition

Share of requirements, also known as share of wallet, is calculated solely among buyers of a specific brand. Within this group, it represents the percentage of purchases within the relevant category accounted for by the brand in question. Share of requirements is, in essence, the market share for a brand within a market narrowly defined as the people who have already purchased that brand.[1]

Purpose

The share of requirements metric aids marketers in understanding the source of market share in terms of breadth and depth of consumer franchise, as well as the extent of relative category usage (heavy users/ larger customers versus light users/smaller customers). Many marketers view share of requirements as a key measure of loyalty. This metric can guide a firm's decisions on whether to allocate resources toward efforts to expand a category, to take customers from competitors, or to increase share of requirements among its established customers.

Construction

When calculating share of requirements, marketers may consider either dollars or units. They must ensure, however, that their heavy usage index is consistent with this choice.

      Unit Share of Requirements (%) = 100 x [Brand purchases (#) ÷ Total category purchases by brand buyers (#)]

      Revenue Share of Requirements (%) = 100 x [Brand purchases ($) ÷ Total category purchases by brand buyers ($)]

References

  1. ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; and David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (Second Edition). Upper Saddle River, New Jersey: Pearson Education, Inc. <http://www.amazon.com/Marketing-Metrics-Definitive-Measuring-Performance/dp/0137058292>


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