Market share
Market share, in
strategic management and
marketing, is the percentage or proportion of the total available
market or
market segment that is being serviced by a company.
It can be expressed as a company's sales revenue (from that market) divided by the total sales revenue available in that market. It can also be expressed as a company's unit sales volume (in a market) divided by the total volume of units sold in that market.
Producers or service providers often see markets in terms of where they themselves are in these markets. This means that they often look at them specifically in terms of their own existing customers and potential customers:
*Customers - In commercial markets it might seem an easy task to define who your customers are; they are simply the buyers of your brand. But the dividing line is often not quite so clear. Where do those lie who have now switched to another brand? Where do you put very loyal users who have most recently bought another brand just for a temporary change? How do you categorize a consumer of a particular durable, when their last purchase might have been half a decade ago? In the public sector, the boundaries may be even more blurred; unemployment benefit is paid to those out of work, but is intended just as much to support their dependents.
*Users - Sometimes users are not quite the same as purchasers. It may be the children in the family who actually consume the cornflakes; and they will usually make their brand preferences very well known, even if it is only because they want to collect the free gifts in the packets. The difference is most noticeable in the case of newspapers and magazines, where readership figures (the number of those who read a given issue, as determined by market research surveys) can be much higher than those for circulation (the number of copies actually sold, from special audits of the publishers' own accounts).
*Prospects' . The term `prospects' is most often used in face-to-face selling, `potential customers' often being used in mass markets, but the meaning is the same; those individuals in the market who are not the organization's customers. Again, however, the boundaries are not quite so clear. Are lapsed customers to be included? Is everyone in the market a prospect, or should only those who are likely to buy the particular brand be included? The concept of `prospects' may sometimes be just as applicable in the public sector. A government will undertake extensive advertising campaigns because as few as 50 per cent of those entitled to family benefits actually claim them. The government is here attempting to convert prospects into customers.
In practice, however, these are seen as broad categories, so the fine distinctions questioned above do not normally pose critical limitations. The important fact is that some of the individuals in the market buy the producer's brand and some do not. The measure of this difference is often given by brand
'penetration' .
Penetration
This is the proportion (percentage) of individuals in the ' market' who are users of the specific (brand) product or service, as determined by the numbers who claim in response to market research to be users. In the non-profit sector it can often be used just as effectively as, for example, a measure of the number of clients receiving help as a proportion of the total population who might need the service.
The measure of `penetration', however, does not allow for the rate of usage or purchase by different individuals. The most commonly used measure, therefore, is
market share or
brand share.
Brand (or market) share
This is the share of overall 'market sales' taken by each
brand. In the consumer field, this is usually measured by audit research on panels of retail outlets, such as that undertaken by A. C. Nielsen; and hence represents consumer purchases and not necessarily usage - although the distinction is usually not important. In the industrial field it is usually a `guesstimate' based on research of a limited number of customers; although in some fields government departments audit total output.
Once more there are complications. The share can be quoted in terms of volume (the brand has a 10 per cent share of the total ' number' of units sold) or in terms of ' value' (at the same time the brand took 15 per cent of the total money being paid out for such products, since it was a higher priced brand). This difference can sometimes be dramatic.
The results of Andrew Ehrenberg's research have complicated matters further. He shows that - unlike the traditional view that customers buy just one brand - they actually buy a
'portfolio' of brands. Their brand loyalty is, therefore, measued in terms of the share of overall purchases over time, within that portfolio, held by the brand in question!
The measure of share, and the concept of prospects, are important because they delineate the extra business that a producer can reasonably look for, and where he or she might obtain it. On the other hand, the evidence in many markets is that most business comes from repeat purchasing by existing customers.
Increasing market share is one of the most common objectives used in
business. The main advantage of using market share is that it abstracts from industry wide
macroenvironmental variables such as the state of the economy, or changes in tax policy.
Other objectives include
return on investment (ROI),
return on assets (ROA), and target rate of
profit.
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