The goal of marketing performance metrics is to make sure we invest and allocate our limited resources in the most effective initiatives. Based on this our marketing metrics should have the power to inform us what is working and what is not working so we can reallocate resources and continuously improve our business.
One of the requirements of any business metric and key performance indicator is to give us actionable information: if certain KPI reports performance below a certain level this information has to have a meaning for us which is actionable and it should at least leads us to a discovery process or simply leads us to the required plan of action.
Let’s talk about market share.
Market share has been traditionally one of the top marketing metrics. Executives like to show grow in market share as their achievement. For example, in the last 12 months we managed to grow our market share by 15%, sounds really good.
The question is how relevant is market share today as a marketing metric or business metric in general?
For the market share metric to have a meaning the industry where the company operates has to have a clear boundaries. Traditional industries have a very clear limits.
By definition market share is the share of the market in terms of volume (number of units sold) or total revenue made by a certain company. Theoretically in order to have an accurate market share metric you’ll have to be able to count every competitor and every customer in your industry and know their sales and units sold. Are you able to do it?
Most industries have been transformed completely today. For example most of the traditional photo industry has been transformed from chemical into digital business. The publication industry has been greatly transformed from print into digital as well. If you are a publisher what is your market and industry? Can you define it by specifying the number of competitors and users? Even if you can give a good estimate is this metric relevant anymore?
Startups which are in the phase of shaping their strategy and business model continuously are trying to enter new markets and develop offerings for new market segments and niches. The market share here has no meaning and it is impossible even to estimate any results or define any market or industry in a clear way. In most cases using market share in their business plan does not make any sense for investors.
For large corporations this is true as well. Think about Microsoft or General Electric for example and how many markets and industries they target. Can you count every competitor and their unit sales and total revenue in each of those markets? There are so many small players in each and every industry today and every industry is global so good luck with your counting.
There are still “traditional markets” where management still is focused on the market share as a marketing metric and maybe they can still calculate it or at least estimate it. For those the question is: Are you missing the boat? Why have you not been able to attract new market segments and reposition your offerings to capture entire new markets? Have you used your core capabilities to develop new products and services to diversify into new markets and compete with completely different industries?
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