iTunes and Consumer Share of Wallet

by Ben Bajarin   |   October 14th, 2011

I recently read an interesting article in the Harvard Business Review which proposed a theory that consumers give more share of their wallet (money) to brands they rank highly.

The premise of the article was that companies need to focus more on their brand identity in the minds of consumers if they want to command more share of consumers wallets.

I’ve had a similar theory but it wasn’t related to brand loyalty, although that makes sense, but more directly tied to a brands ability to be sticky.

Granted, I am looking at this as it relates to the technology industry where the HBR article was focusing more broadly.

From a technology industry perspective, companies who have more sticky solutions have a higher chance of maintaining or growing consumer share of wallet.

To test my theory I researched and then plotted out my own annual spending in iTunes. I figured I was as good a test as any since I have used iTunes since the beginning in 2003. And I believe Apple has created one of the more sticky ecosystems on the market.

Take a look at the chart below which we will call exhibit A.
 

 
If you notice my annual spending in iTunes either stayed steady or grew on an annual basis. As Apple introduced more products into their ecosystem both in terms of hardware, new forms of media, and then apps, my iTunes spending went up significantly.

Once I was committed to the Apple ecosystem and as Apple provided me with more value as a part of that ecosystem; they continued to get a steady share of my wallet.

There are some essential points to understand as a part of this theory. First of all, I may very well spend more than most people in iTunes but I would still argue that annual iTunes spends would stay steady or grow the longer a consumer is in the Apple ecosystem.

Second, the more products or “touch points” in that ecosystem either owned by a consumer, or by a family, contributes to the ecosystem loyalty as well as the overall opportunities to spend money.

Of course brand is important and plays a role but perhaps not quite as much as the HBR article points out–or at least not as much in realm of tech.

For example, if brand was directly tied to share of wallet then Google or Microsoft for that matter would have a larger share of wallet. I use those brands as an example because they are both ranked on the top 10 list of brands, both ahead of Apple according to InterBrand.

I would argue, more important than brand in the mind of consumers is brand trust when it comes to share of wallet–especially in tech.

The most important observation about this theory of brand loyalty equalling share of wallet in my test is that the obvious first step is to get consumers into the brand ecosystem so that brand can compete for share of wallet.

In retail for example the common saying is “the first step is to get the consumer in the door.”

For Apple they got consumers in the door with the iPod,then iPhone, iPad etc. This strategy continues as they offer more products at attractive price points which continue to get consumers into Apple’s door and more importantly into Apple’s ecosystem.

Amazon has a similar strategy with the Kindle and now the Kindle Fire. These products, or screens, are the things that get consumers into the door and into the Amazon ecosystem. Amazon wants to provide as many touch points as possible for consumers to utilize their retail services.

Similar to my iTunes spend history I would be willing to bet that folks who examine their Amazon history find a similar pattern. Namely that the longer you are committed to that service the more your annual spending goes up.

In both my examples Amazon and Apple have a strong share of consumer wallet. Companies like Google and Facebook and others who want to drive commerce are having a harder time–even though they have strong brand rank in the minds of consumers. This is because they lack consumer trust.

Companies who want to own a larger share of wallet need to create compelling products that get consumers into their door. Continue to create a trusted brand experience with their products, offer a vast array of products or services, is a sound strategy to keep consumers loyal to their ecosystems.

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Ben Bajarin

Ben Bajarin is a Principal Analyst at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research. He is a husband, father, gadget enthusiast, trend spotter, early adopter and hobby farmer. Full Bio