Market Share

Question 1

Market Share Purpose

Answer 1

• 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)

Question 2

Market Share Considerations

Answer 2

• 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

Question 3

Relative Market Share Purpose

Answer 3

• 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.

Question 4

BCG Grid

Answer 4

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

Question 5

Brand Development Index/ Category Development Index Purpose

Answer 5

• 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.

Question 6

BDI Definition

Answer 6

BDI quantifies how well a brand is performing within a specific group of customers compared with its average performance among all consumers

Question 7

CDI Definition

Answer 7

CDI measures the sales performance of a category of goods or services within a specific group, compared with its average performance among all consumers.

Question 8

High CDI and BDI

Answer 8

Good market potential to invest

Question 9

High BDI and Low CDI

Answer 9

Good market oetntial but monitor BDI. Study if category is underperforming or needs attention

Question 10

High CDI and Low BDI

Answer 10

Good potential but study why brand is underperforming

Question 11

Low BDI and CDI

Answer 11

Poor market potential and don’t invest

Question 12

Problems with BDI and CDI

Answer 12

• 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

Question 13

Penetration purpose

Answer 13

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

Question 14

Decision to be made whether to seek sales growth by?

Answer 14

• 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.

Question 15

Penetration definition

Answer 15

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.

Question 16

Difference between market share and penetration

Answer 16

Market share focuses on the sales of a product (#, $)

Penetration focus on the number of buyers/ users

Question 17

Problems with penetration share

Answer 17

• Time period is crucial (especially longer purchase cycle products)
• use benchmarks
• can involve self-reported data

Question 18

Share of wallet purpose

Answer 18

• 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

Question 19

Share of wallet considerations

Answer 19

• 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.

Question 20

Heavy usage index purpose

Answer 20

• 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

Question 21

Heavy usage index considerations

Answer 21

• 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.

Question 22

Market Share redefined

Answer 22

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.