Market Share Flashcards
Market Share Purpose
- To assess firm strength vs. competition, comparing us and them. Who are they, define competitive universe against product/ brand/ business/ unit/ sales/ areas/ customers/ time.
- Most marketing strategies have sales/market share as the main short-term objective
- Strategic implications (five forces analysis, competitive strategy, generic strategies)
Market Share Considerations
- Market definition: what is your business scope, what time period, location, etc.
- Where in the channel do you measure? (e.g., Nike store shipments, or retail sales)
- Units or dollars?
- Use benchmarks
- Survey self-report vs. transactional data
- Always trend the denominator: total sales
- Share vs. profits
Relative Market Share Purpose
- To assess strength vs. largest competitor (dominance or concentration in market). Stronger measure for strategic decisions. Rather than fighting smaller competitors, focus is on the strongest competitor. E.g. Apple only compares itself to Samsung, rather than much smaller competitors.
- To construct the BCG grid. Understand where to investment when company has multiple portfolios. Follows the PLC.
BCG Grid
Star: as they have future growth potential, invest to maintain dominant position
Cash cows: extract profits and invest as little as possible
Question Marks: need to be analysed carefully to determined if they are worth the investment required to grow market share
Dogs: candidates for divesture
Brand Development Index/ Category Development Index Purpose
- To assess pockets of segment/geographic strength/market potential (in what areas are we selling more in relative terms than in other areas?). Useful for marketing communications, based on marketing campaigns
- BDI assesses brand/company strength.
- CDI assesses category strength
- Originates in media planning but is used for other purposes
- Media & communication planners typically look at both when considering which markets or regions should receiver heavier media weight.
- Understanding specific customer segments relative to the market share as a whole.
BDI Definition
BDI quantifies how well a brand is performing within a specific group of customers compared with its average performance among all consumers
CDI Definition
CDI measures the sales performance of a category of goods or services within a specific group, compared with its average performance among all consumers.
High CDI and BDI
Good market potential to invest
High BDI and Low CDI
Good market oetntial but monitor BDI. Study if category is underperforming or needs attention
High CDI and Low BDI
Good potential but study why brand is underperforming
Low BDI and CDI
Poor market potential and don’t invest
Problems with BDI and CDI
- Precise definition of segment/geography and total market
- Not to confuse BDI/CDI with a market sizing exercise (BDI/CDI are per capita)
- Does not necessarily translate into the size of the business opportunity
- Choice of offensive/ defensive strategies depends on other factors as well
Penetration purpose
To assess the diffusion of a brand/category in the entire population (for a defined period). How to penetrate a consumer’s mind. E.g. Apple
Decision to be made whether to seek sales growth by?
- Acquiring existing category users from their competitor
- By expanding total population of category users by attracting new customers to the market
- Time period. As time goes by, penetration increases.
Penetration definition
the number of people who buy a specific brand or category of goods at least once in a given period divided by the size of relevant market population.
Difference between market share and penetration
Market share focuses on the sales of a product (#, $)
Penetration focus on the number of buyers/ users
Problems with penetration share
- Time period is crucial (especially longer purchase cycle products)
- use benchmarks
- can involve self-reported data
Share of wallet purpose
- A measure of loyalty and cross-purchases in the category
- Brand loyalty is a two-dimensional construct in marketing: Attitudinal and Behavioural
- This metric measures behavioural loyalty
Share of wallet considerations
- Data can be from panels, self-reported, diary, scanner data
- Make sure you “filter” data by brand purchasers only, otherwise you get market share
- Double jeopardy in marketing: an empirical law where, with few exceptions, the lower market share brands in a market have both far fewer buyers in a time period and also lower brand loyalty. Low share brands get punished twice.
Heavy usage index purpose
- To define and measure whether a firms consumers are “heavy users”
- Answers the question “how heavily do our customers use the category of our product?”
- To assess intensity of consumption for our brand vs. the category - to what extent we “own” heavy users
Heavy usage index considerations
- A high heavy usage index does not indicate how heavily customers use a specific brand, only how heavily they use the category
- A brand can index high on heavy users, but those heavy users may use other brands heavily.
Market Share redefined
Broken down into share of penetration, usage index and share of wallet.
- By breaking down market share into these three components, we can measure a company’s performance in each component to better understand where to focus efforts to improve sales.
