Selling: I don’t need to know my Market Share
Having worked for a large organization we know just how much time and effort is spent trying to calculate Market Share…but to what end?, and is it of any value to small growing companies?
These very valid questions can motivate small companies to ignore market share altogether, preferring to focus on securing business; and we fully support this..up to a point, or more pertinently up to a stage in their development. So at what point is it worth investing time and effort in establishing market metrics of which the share is only one?
It’s true that knowing the market share is of little practical value to a small company unaffected by customer market share balancing, or possible monopoly issues. However, to calculate the Market Share you need to estimate the size of the Market, and this is valuable if you define them in a useful way. Market shares are often calculated by revenue, split geographically, by client and or by product line. In other words, represent a wonderful exercise in navel gazing.
What if you only have a single technology? ;the temptation is to ignore market share as a useful tool. However, if you define your markets by the reasons customers actually buy your product, you will get quite a different view of the world. Some may buy because you are cheaper, others because you can deliver quickly. Some may need to de-risk an operation, or your associated services such as training and support differentiate you from your larger competitors. Applying the old adage “Its not what you’ve got, but what you do with it”, you will see that your core technology may well be the thing that got buyers interested, but may not necessarily be the reason you closed the sale. Knowing how well you are doing by these business-focused criteria brings tangible value. Still don’t need to know your Market Share?
More important than market share are market size and market rate, but both are integrally linked to your share of the market.
Whilst you can safely assume that there is always scope to grow when you are small, especially if you have a disruptive service or product, there will come a point at which some markets will become less attractive when you look to build sales volume. Imagine you identify that 30% of your sales in a market come from the fact that you can deliver below the market rate and gain market share from your competitors; by doing so you are directly driving the benchmark market rate down in that market, which may lead to more short term sales but will also limit the ultimate growth potential of the market assuming no cheaper competitor is attracted to the market. If you have only 2% you will have less impact on the market rate. This can be critical if you also have value-added offerings you would like to introduce to the same geographical market.
Some sectors will lend themselves more naturally to your wider offering. Training and support may be more attractive to smaller customers or government-led groups with a wider social remit, but bring little value to well developed and staffed customers. The premium you may therefore enjoy will be limited to a sector of the geographical market. In terms of profitable growth this may be sufficient to meet your needs,but your market share may well be an indication that you are reaching saturation in that market.
So Market Share is valuable to smaller companies on condition that you define your markets in a meaningful way. Through this exercise you can build a fuller understanding of the size of each market you define, and see where you can gain a premium on your pricing.
