Patronage concentration is a term used in
marketing
Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce.
Marketing is usually conducted by the seller, typically a retailer or ma ...
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 a 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 (economics), 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 ...
. 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 person's spending 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 the use of several different stores. In particular, patronage concentration involves trading off economic resources against product assortment, and 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 cost
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, ...
s of time.
See also
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Loyalty business model
The loyalty business model is a business model used in strategic management in which a company's resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or s ...
*
Personalized marketing
Personalized marketing, also known as one-to-one marketing or individual marketing, is a marketing strategy by which companies use data analysis and digital technology to show adverts to individuals based on their perceived characteristics and ...
*
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