Loyalty glossary · 7. Data and analytics (31)
Share Of Wallet
Share of wallet is the percentage of a member's total category spending that is captured by one loyalty programme rather than by its competitors.
Point accrual shows only what a member earned inside the programme. It cannot show what that same member spent elsewhere in the category, so it cannot show share of wallet. The metric is a ratio, and the denominator is the part the programme does not own.
Share of wallet is routinely confused with share of spend, because both are expressed as percentages. The difference is the denominator. Share of spend divides by total spend across all programmes, but share of wallet divides by total category spend, including spend with no programme. A member can look dominant inside a programme and still be marginal in the category.
Work the arithmetic on a realistic member. A member spends 500 dollars per month in hotels. The programme captures 300 dollars of that, so share of wallet is 60 percent. If the member's total hotel spend rises to 700 dollars per month and the programme still captures only 300 dollars, share of wallet falls to 43 percent.
Because the denominator is unobserved, a credible share of wallet number is always a model. An actuarial model uses observed activity, spend patterns, and lapse assumptions to estimate total category spend. The estimate is only as good as its priors, and any programme that reports share of wallet without stating its denominator model is reporting a guess as a measurement.
Qualifying members on activity alone, rather than on share of wallet, punishes small spenders and ignores the members who consolidate most of their category spend. Activity-based qualification counts stays or transactions, which is easy to verify, but it says nothing about the member's potential. Share of wallet, measured properly, is a better tier input because it rewards members for the behaviour that matters, not for the behaviour that is easiest to count.