What is more critical for the growth of the platform – sellers or buyers; higher share of wallet of existing customers or new customers
Answers
Answer:
When we talk about building and scaling a marketplace, the main topic of focus is usually how to crack the chicken and egg problem i.e. building initial liquidity (I wrote about this in my previous post WTF is marketplace liquidity?). What is less often discussed is how to go from initial liquidity to a high share of wallet on both the demand and supply side (also known as the share of earnings on the supply side). In other words, how does a marketplace go from being one of many options for a buyer looking to purchase a specific type of good or service to becoming their main option? On the flip side, how do marketplaces go from being one of several revenue streams for a supplier to becoming their most significant revenue stream?
The aim of the following post is to define what we mean by share of wallet (SOW), why it matters, and to dive into a couple of strategies for how to measure it. I hope that it will be a useful tool for marketplace entrepreneurs and operators who are trying to better understand and measure some of the dynamics of their platform.