Share of Hearts, Minds, Markets Part1_class (1) PDF

Share of Hearts, Minds, Markets 1-1 Market Share: Purpose o Key Indicator of market competitiveness, how well a firm is doing against its competitors o It can be used while doing Situational Analysis (i.e. SWOT), to evaluate strengths/weaknesses o Sales targe...

Share of Hearts, Minds, Markets 1-1 Market Share: Purpose o Key Indicator of market competitiveness, how well a firm is doing against its competitors o It can be used while doing Situational Analysis (i.e. SWOT), to evaluate strengths/weaknesses o Sales targets can be attained either by growing the market or by capturing share from competitors. o Therefore, understanding the drivers of market share becomes a crucial task. 2  Market Share: Construction Market share is the percentage of a market (in units or revenue) accounted for by a specific entity Sales Unit Market Share (%) = Total Market Sales Sales Revenue ($) Revenue Market Share (%) = Total Market Sales Revenue $) Chapter 3, Based on Farris et al. (2010). Marketing metrics: the definitive guide to measuring marketing performance. 2nd Edition, Upper Saddle River, NJ: Pearson 3 Education/Wharton School Publishing. Relative Market Share: Purpose o A key indicator used to assess comparative market strength, how well a firm/brand is positioned in the market o It can be used as a way to benchmark a firm’s share against that of its larger competitor o Serves as an early indicator of opportunities or problems 4  Relative Market Share: Construction Relative market share indexes a firm’s or brand’s market share against that of its leading competitor Firm’s (or Brand’s) Unit Market Share Relative Unit Market Share (%) = Leading competitor’s unit market share Firm’s (or Brand’s) Revenue Market Share Relative Revenue Market Share (%) = Leading competitor’s revenue market share Chapter 3, Based on Farris et al. (2010). Marketing metrics: the definitive guide to measuring marketing performance. 2nd Edition, Upper Saddle River, NJ: Pearson 5 Education/Wharton School Publishing.  Market Share: Example The following data was obtained from Gartner Inc. These figures refer to PC units (in thousands) shipped to the US market. PC market includes desktops, laptops, and mini-notebooks (tablets such as iPad are not included here). What was the unit market share of HP in 2010? Company 2010 HP 19,030.98 Sales Dell 16,716.99 Unit Market Share (%) = Apple 6,838.46 Total Market Sales Acer 8,725.66 Toshiba 6,667.80 19030.98 Unit Market ShareHP, 2010 (%) = Others 14,058.46 72038.36 Total 72,038.36 Unit Market ShareHP, 2010 (%) = 0.264 x 100 = 26.4% 6  Relative Market Share: Example The following data was obtained from Gartner Inc. These figures refer to PC units (in thousands) shipped to the US market. PC market includes desktops, laptops, and mini-notebooks (tablets such as iPad are not included here). Unit Market Company 2010 Share 2010 What was the relative unit market share of Dell in HP 19,030.98 26.4% 2010? Dell 16,716.99 23.2% Apple 6,838.46 9.5% Acer 8,725.66 12.1% Toshiba 6,667.80 9.3% Others 14,058.46 19.5% Total 72,038.36 100.0% Relative Unit Market ShareDell, 2010 = 7  Market Share and Relative Market Share: Cautions Define the market very well: A very Shipments Unit Relative broad definition dilutes our focus. Market A very narrow definition leads to Company - units, Unit Market Share 2010 Share 2010 missed opportunities. 2010 HP 19,030.98 26.4% 1 Dell 16,716.99 23.2% Specify the period of time (year, Apple 6,838.46 9.5% 0.36 quarter, monthly) Acer 8,725.66 12.1% 0.46 Toshiba 6,667.80 9.3% 0.35 Indicate whether it is market share in units or in revenues ($) Others 14,058.46 19.5% 0.74 Total 72,038.36 100.0% - Indicate whether market share is calculated based on shipments or sales of retailers Indicate whether market share is calculated before or after discounts 8 Market Share: Cautions (cont’d) Evaluate the following statements: o Example 1: Our market share declined from 30.5% to 25% in the first five months of the year o Example 2: We are the unit market share leader in sales of gluten free potato chips in Ontario in the second quarter of 2018. 9 Market Concentration (concentration ratio) o A metric used to assess the intensity of competition in an industry o Usually calculated by summing the market shares of the largest three or four firms in the market Unit Revenue ($) Shipments Market market Company - units, 2010 Share share 2010 (2010) HP 19,030.98 26.4% 28.5% Concentration ratio (unit) = 59.1% Dell 16,716.99 23.2% 20% Concentration ratio (revenue) = 69.5% Apple 6,838.46 9.5% 21% Acer 8,725.66 12.1% 8.5% Larger players dominate the market! Toshiba 6,667.80 9.3% 6.9% Others 14,058.46 19.5% 15.1% Total 72,038.36 100.0% 100% 10  Penetration: Construction Penetration is defined as the number of people who buy a specific brand or a category of goods at least once in a given period, divided by the size of the relevant market population Number of customers who have purchased a product in the category Market Penetration (%) = Total relevant market population Number of customers who have purchased the brand Brand Penetration (%) = Total relevant market population Brand Penetration (%) Penetration Share (%) = Market Penetration (%) Chapter 3, Based on Farris et al. (2010). Marketing metrics: the definitive guide to measuring marketing performance. 2nd Edition, Upper Saddle River, NJ: Pearson 11 Education/Wharton School Publishing.  Penetration: Example In 2016, in a market of 768,025 individuals over the age of 15 in the City of Edmonton, 85,000 individuals purchased Haagen-Dazs ice-cream. 520,000 individuals purchased at least one product of any brand in the ice-cream category. For 2016, what was the market penetration in the ice-cream category? What is the penetration rate and penetration share of Haagen Dazs? 12 Brand Development Index and Category Development Index: Purpose o Category development index is used to assess the potential for a product / service in a given customer segment (e.g. demographic or geographic) o Next, the brand development index is needed to measure the sales performance of the brand in that customer segment 13  Brand Development Index and Category Development Index: Construction Category development index (CDI) measures the sales performance of a product category within a specific group of customers, compared with its average performance among all customers Category sales to Group (#) / Households in Group (#) CDI = Total Category Sales # / Total # of households Brand development index (BDI) is a measure of how a brand is performing within a specific customer segment compared with its performance among all customers Brand sales to Group (#) / Households in Group (#) BDI = Total Brand Sales # / Total # of households Chapter 3, Based on Farris et al. (2010). Marketing metrics: the definitive guide to measuring marketing performance. 2nd Edition, Upper Saddle River, NJ: Pearson 14 Education/Wharton School Publishing.  Category Development Index: Example During the year ending March 2017, 4.25 million Albertans spent $591.78 million on wine. The total wine consumption by 36.5 million Canadians during that time was worth $7,187 million. For the year ending March 2017, what was the category development index for wine in Alberta? Source: Statistics Canada 15  Brand Development Index: Example Garth Brooks sold 1,431,921 concert tickets in America in 2017. 50,000 of those tickets were sold in his Oklahoma City tour. The population of the USA in 2017 was 325.7 million. The population of Oklahoma was 3.93 million. For 2017, what was his brand development index in Oklahoma? Source: Statista.ca Source: United States Census Bureau Source: https://newsok.com 16