There is always a struggle among the competitors to get the highest market share (m.s) and become market leaders. No doubt there are many advantages in that and many of the advantages have been discussed enough in the literature. Yet it is worth recalling them.
There is no guarantee that high share should result in high profits, at least not in the immediate future. Short term profits and market share don’t go together because we need to reinvest what ever additional revenue comes from the product back into the product to keep growing. If we discontinue reinvesting and the market is still growing fast competition will take the share and we may soon find ourselves in second or third position. Many strategy models have emphasized this including the Boston Consulting Group.
Why build market share and want leadership?
The reason why some one would like to build his share and also retain leadership is because your brand will enjoy the most loyalty and image. When the brand’s share in the market is higher than others you get the advantages associated with volumes and you also benefit from the invisible power in the market. Power is always good because you can set the norms in the market, for example distribution commissions, technology trends, price trends and so on. The competitors will need courage to challenge you as you might really retort their actions.
Though there have been controversies around it, the experience curve effect is supposed to bring down inflation adjusted costs with cumulative volumes and certainly the market leader should have the most cumulative volume giving him the experience advantage. Given that the advantages accrue with cumulative volume over time it is to be understood that the impact on profits also will be seen later.
What is market share?
Market share is a measurement of the current sales. The sales can be from repeat buying by limited customers or limited quantity buying by a very large number. In the first case any change in the business conditions of the customer will alter market share of the seller too. In the second situation, if single customer out of million who buy on unit a week shifts over to another brand it may not tilt the equation that badly.
Market share limitations
The difficulty with market share is since it is based on current sales one does not know whether the customer bought the brand because he loves it and prefers it or he bought it because there is no better alternate in the market at the time of his buying, or his preferred alternate is not available at the place of his buying due to distribution shortage. If the customer is very loyal to his brand and the brand is immense importance to him he will take the time and go to alternate outlet where his preferred brand is available. If not, he will settle for what is available. Even if he did buy the alternate brand for now as soon as his preferred brand becomes available he will buy that. He may even suggest to the store manager to get his brand soon. Thus market share does not men loyalty. It is just a sale.
One can see the difference between the two choices above. It is the loyalty and brand relationship that is in consumer’s mind that motivates him to go to alternate outlet or insist that it should be made available at the outlet where he is shopping.
Consumer behavior studies show that consumers show spurious loyalty sometimes towards the brands. That is, they don’t really have a very positive attitude towards the brand but buy due to lack of alternative. Such a purchase is one time phenomenon and makes the sales and market share highly vulnerable. Their argument is that to maintain steady market shares brand owners need to develop strong mental attachment to the brand a positive attitude and genuine loyalty. If this happens, the brand enjoys high mind share.
Mind share reduces vulnerability
From the above it must be clear that a high market share low mind share brand is more vulnerable to a brand with high mind share low market share brand. The later can always overtake the former if they can get all other strategic inputs right.
Therefore it is always recommended that marketers should
1. Develop positive attitude towards the brand. Mere advertising may not be adequate to achieve this. Consumer-brand associations need to be developed using appropriate methods.
2. Any events or occurrences resulting in negative attitude need to be countered.
3. Periodic attitude audits on brands will help.
4. Surveys on market share need to also be accompanied by surveys of mind share