Posted in Marketing and Strategy Terms, Total Reads: 494
Definition: Revenue Share of Requirements
The Revenue Share of Requirements is a metric that is used in Marketing to know the brand loyalty that customers have towards a particular product. The Revenue share of requirement for a brand is calculated as the ratio between the revenue from the purchase of the brand and the total revenue from the total purchases in the category, including other brands.
If the share of requirements is high, it means that the loyalty towards that brand is also high. If revenue share of requirements is not considered, it could lead to misinterpretations in the market. If a person buys a product of brand A monthly, the company might think that he is a loyal customer, and may even try to profile the customer to find other such customers, thinking that the product suits them. However, if the person buying one product of brand A is also buying 3 products of brand b, the brand loyalty is actually not that high. The revenue share of requirements is a metric that can be used effectively by companies to avoid such errors, since it also takes into account other brand purchases of the customer, as well.
For example, if a customer spends $50 on one brand, and then goes ahead and spends $100 on other brands, the revenue share of requirements may be calculated as 50 / (50 + 100) = 33.33%.