Patronage concentration is a term used in
marketing
Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to empha ...
and retailing. It is the share of an individual consumer's expenditures in an industry or retail sector that is spent at one company. It is the amount that a person spends at one company divided by the amount that person spends at all companies in the industry.
The relation is as follows:
:
.
For example, I may spend $1000 per year at fast food restaurants. If I spend $100 at Wendy's Restaurants, then Wendy's has (100/1000=10%) ten percent of my patronage. As long as the amount spent at one firm is less than the total amount spent at all firms in the industry, the customer will be patronizing more than one firm, and patronage concentration will be less than 100%.
The goal of many firms is to increase the patronage concentration ratio of its customers to 100%. Some firms set different patronage concentration targets for various classes of customers. This reflects the fact that some types of customers are more profitable than others.
This is very similar to
market share
Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a ...
. Whereas market share describes the percentage of all customers that patronize a company relative to the industry total, the patronage concentration ratio describes the percentage of one customer's patronage going to a company, relative to that persons spend in the industry. That is, market share is the aggregate or macro version of the patronage concentration ratio. Or alternatively, patronage concentration is the micro equivalent of market share.
In retailing, it has been demonstrated that store patronage is a continuum between single store loyalty and use of several different stores. In particular, patronage concentration involves trading off economic resources against product assortment, spatial and temporal benefits. It has been shown that patronage decisions are associated with consumer characteristics that are suggestive of heterogeneous cost–benefit tradeoffs and opportunity costs of time.
See also
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Loyalty business model
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Personalized marketing
Personalized marketing, also known as one-to-one marketing or individual marketing, is a marketing strategy by which companies leverage data analysis and digital technology to deliver individualized messages and product offerings to current or pr ...
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Relationship marketing
Relationship marketing is a form of marketing developed from direct response marketing campaigns that emphasizes customer retention and satisfaction rather than sales transactions. It differentiates from other forms of marketing in that it ...
References
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Marketing
Marketing analytics
Customer relationship management