Marketers use the term winning when it comes to market share as if it were some kind of competition like sports. By the same token, there is the possibility of “loosing” market share which is often as devastating as losing a major competitive event. Market share is that significant!
Kellogg’s recently recalled some 28 million boxes of cereal because of an odor in its packaging. Marketing analysts were immediately assessing whether the recall would affect its market share, concluding that its world wide positioning would help carry the icon brand beyond the recall without any loss in market share.
Cereals is one of those categories where market share was always a key factor in the fight for the coveted # 1 position with such competitors as Post and General Mills. Market share directly relates to the positioning of a brand. Having the largest market share means leadership. It is the best evidence that a product is the leader in its category, which in turn can affect many other important variables: stock prices, profits, sales, valuation, and future mergers and acquisitions.
Market share in many companies is like winning a presidential election. The country is divided into regions and staff working for a candidate in each region is expected to win the lion’s share of votes (market share). The whole issue of market share for large businesses is in a way much like the electoral college in a presidential bid. The companies make a concerted effort to be the leader in the large cities because cumulatively they add up to the largest concentrations of consumers. How companies fare in large markets is also important in the overall positioning of a company.
The battle for having leading market share occurs daily in communications, food, technology, and in so many other categories. When a company actually “wins” market share, it usually means that it has successfully deposed a competitor. At that point a key imperative is to stay in the leadership position. For the dethroned entity, it becomes a challenge to recapture its former position. This was always the case not only with the cereals companies, but with the highly heralded Coke -Pepsi wars and also with the automobile manufacturers. At first it was the US manufacturers fighting for market share amongst themselves and then it was the Europeans who muscled their way into the leadership position in the US.
The US auto manufacturers are one of the bright stories to emerge from the recent recession. On the brink of bankruptcy and bailed out by Uncle Sam, they are in the throes of an unprecedented comeback. While leader Toyota was embroiled in a myriad of quality issues, the US manufacturers actually are producing a much better product and it is not going unnoticed. It will be awhile until they are once again locked in a battle for the leadership in market share with the Europeans, but many observers say that it is in sight.
While market share is most often associated with major brands, marketers say that it can be applied to almost any business situation, even for the local cleaners or restaurant. The upshot is that having the largest market share most often spells being the leader.
Being the leader with significant market shared directly relates to many characteristics of the brand, first and foremost is quality. When the majority of people in a given market prefer a certain brand, they are reaffirming that they consider the product the best value for their money. They are attesting to the fact that the product has an edge over competitors and that is worth its weight in gold.
But not always is winning market share synonymous with being number one. Cutting into the market share of a leader is considered to be a major coup for brands trying to compete in a given category. Gaining percentage points of share from a leader is considered to be a formidable achievement for a product or brand.
Many readers will remember when Avis and Hertz were vying for market share. While Hertz claimed that it was the leader, Avis came up with a slogan “We Try Harder.” In essence Avis was conceding the Number One slot but pointing out its formidable position in market share. Being second in market share or even third may for some brands be as important as it is for some brands to be the leader. Marketers say that Avis was actually hoping that its honest We Try Harder would catapult them to Number One.
I recently read about a number of power drink companies that are cutting into market share of the large beverage companies in an age when the power drinks are preferred by many young customers. The marketing director of one of the brands wrote: “Every customer that we wean off Coke and Pepsi is a major shift in market share. The battle for market share is with every purchase.”
The quest for market share is so vital in the marketing arena that almost every brand ultimately defines its success or failure by looking at its market share. A shift of even a percentage point or two can have major implications for the bottom line of a brand.
Out of the Box is a collection of strategic marketing articles that Menachem Lubinsky has published on various topics, trends and ideas in the marketing world. The articles have been published in the Hamodia weekly newspaper circulated on three continents to a readership of well over 100,000.
The name, “Out of the Box” is a term used frequently in business nowadays to describe creative thinking that is not the norm. It is meant to help a business pull away from the pack or separate oneself from the competition. It is to some extent fraught with risk, simply because it is not the run of the mill thinking, but it is at the same time the key to reaching the next opportunity.