If there is a market for what you sell, it won’t be long before you face competition, if you don’t already. The key to long-term success is to stay ahead of the pack. While you may be achieving double-digit revenue growth, measuring market share requires answering these three key questions:
- How fast is the overall category growing?
- How fast are your major competitors growing?
- What is your market share compared to your strongest competitors?
Can you answer these questions for your organization?
Market Share is a Measure of Your Competitiveness
Why do the answers to these three questions matter? Even if you are making, or exceeding your performance target(s), if you are not growing as fast as the category, or your strongest competitors, your position in the category will eventually decline. Market share is among the most valuable metric a company can use to judge the effectiveness of any possible growth and revenue generating initiatives.
Market share provides a way to measure how you are doing compared to your competition. It quantifies whether the execution of your strategies is producing business results. It’s important to have some way to measure your competitiveness, and market share is just one such measure. It is a key performance indicator along with other measures such as customer lifetime value, brand preference, product adoption rate, and category ownership. Maintaining or improving your market share is a measure worthy of investment in.
When You’re Not Keeping Pace, You’re Falling Behind
Growth is getting tougher in the face of dynamic markets, rising customer expectations, and digital disruption. Stronger, more aggressive, competitors are entering your market every day.
If you can’t keep pace or widen the distance between you and your competitors, you are falling behind. Market share growth requires maximizing business and customer opportunities and increasing customer consideration. Dominic Dodd and Ken Favaro wrote in their book, The Three Tensions: Winning the Struggle to Perform Without Compromise, that 80% of executives believe their product stands out against the competition, but only 8% of their customers agree. How your offer stacks up against the competition is a key indicator of whether you are on the fast-track or falling off the track.
Every competitive athlete knows they must be exceptional at the basics. The same holds true for businesses in a competitive environment. In addition to a solution that solves customers’ problems, and a solid go-to-market strategy and plan, companies must excel in five areas:
- Outstanding differentiation
- Consistent innovation
- Data-derived insights, especially competitive intelligence
- Rigorous performance management
Take More Than Your Share of the Market
Once you have mastered the five basic areas above, address these three capabilities next:
- Create and execute a growth plan. Create a plan tied to specific market share targets. Businesses that plan for growth are more successful than those that stand still. A study by Jan Brinckmann, Dietmar Grichnik, and Diana Kapsa discusses improved business performance based on such a plan. Companies that follow a plan grow 30% faster than those that don’t. Good growth plans are specific. They are clear about where, when, and how your organization plans to expand, including factors such as new customers, locations, products, acquisitions, channels, and services. They identify the degree of growth expected and the implications of this growth on market share. Our Circle of Traction methodology offers one proven systematic approach to market growth.
- Align for growth. Fred Smith, Chairman of Federal Express, is attributed with saying, “Alignment is the essence of management.” Ensure your people, processes, strategy, and technology are in alignment with, and are sized to support your growth plan. Research by LSA Global has found that when companies achieve alignment, they grow revenue 58% faster, are 72% more profitable, and retain customers 2.23-to-1 compared to companies that are misaligned. Alignment extends beyond your culture and people. It is central to everything you do. For example, here are two questions that provide insight into your level of alignment:
- Are the solutions and services you produce completely in line with what your customers want to buy?
- Are daily decisions and actions completely aligned with the strategic direction of your company?
Gaining market share takes a disciplined, deliberate approach to building your growth initiatives and capabilities. Regularly fine-tune and add processes, resources, and capabilities where they will produce the most value.
If you’re not sure how you stack up against the competition, conduct a benchmark study to help you make realistic assumptions regarding your organization’s ability to gain market share and to set realistic targets.
Leverage external experts to ramp up your internal speed, augment your teams, and upskill your people.
 You can use a Customer Growth Index created by McKinsey to measure consideration. Take how frequently a customer puts a brand in his or her initial consideration set versus other brands in the category. Divide that number by the brand’s market share and multiply this number by 100. This measure provides insight into how much consideration a brand commands and how much consideration is needed to support growth.