Marketing Metrics

Chapter 1:Introduction

Chapter 2: Market Share

Marketing Metrics

Chapter 2: Share of Hearts, Minds and Markets

Chapter 2

What is market share?

At first it appears to involve a simple calculation of us / (us+them).

However: raises host of questions such as “Who are they?” and “Which units will be used?”.

Marketer’s rely on numerous different indicators of future changes in market share.

Chapter 2

We will look at the following indicators:

PART 1:

2.1. Market Share

2.2. Relative Market Share and Market Concentration

2.3. Brand Development Index and Category Development Index

2.4. Penetration

Introductory Chapter

2.1. Market Share – Definitions

Market Share: The percentage of a market accounted for by a specific entity.

Unit Market Share: Units sold by a particular company as a percentage of total market sales, measured in the same units.

Revenue Market Share: It reflects the price at which goods are sold.

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Introductory Chapter

2.1. Market Share

PURPOSE: Market share is an indicator of how well a firm is doing against its competitors.

The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.

Marketers must translate sales targets into market share as this will demonstrate whether forecasts are to be obtained by growing with the market or capturing share from competitors.

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Introductory Chapter

2.1. Market Share – Calculations

Unit Market Share (%) = Unit Sales / Total Market Unit Sales

Revenue Market Share (%) = Sales Revenue / Total Market Revenue

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Introductory Chapter

2.1. Market Share – Data Sources, Complications and Cautions

Market definition is never a trivial exercise.

Data parameters must be carefully defined.

The time period measure will affect the signal-to-noise ratio.

There is a threat of potential bias in reported shares.

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Introductory Chapter

2.1. Market Share – Related Metrics and Concepts

Served Market: The portion of the total market for which the firm competes. May exclude geographic regions or product types.

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Introductory Chapter

2.2. Relative Market Share and Market Concentration

PURPOSE: To assess a firm’s or a brand’s success and its position in the market.

Relative Market Share: Index of a firm’s or a brand’s market share against that of its leading competitor.

Market Concentration: Measures the degree to which a comparatively small number of firms accounts for a large proportion of the market.

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Introductory Chapter

2.2. Relative Market Share and Market Concentration – Calculation

Relative Market Share (I) (%) = Brand’s Market Share / Largest Competitor’s Market Share

EXAMPLE

A-One sells 7, 500 cars while Zipper sells 25, 000. Therefore A-One’s relative market share is 7500/25000 = 0.3 (revenue).

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Introductory Chapter

2.2. Relative Market Share and Market Concentration – Related Metrics and Concepts

Market Concentration: The degree to which a relatively small number of firms amounts for a large proportion of the market (Concentration Ratio).

Three (Four) Firm Concentration Ratio: The total (sum) of the market shares held by the leading three (four) competitors in the market.

Herfindahl Index: A market concentration metric derived by adding the squares of the individual market shares of all the players in a market.

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Introductory Chapter

2.3. Brand Development Index and Category Development Index

PURPOSE: To understand the relative performance of a brand or category within specified customer groups.

BDI quantifies how well a brand is performing within a specific group of customers, compared with its average performance among all consumers.

CDI measures the sale performance of a category of goods or services within a specific group, compared with its average performance amongst all consumers.

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Introductory Chapter

2.2. Relative Market Share and Market Concentration – Data Sources, Complications and Cautions

It is vital to use comparable figures in order to develop meaningful results.

2.2. Relative Market Share and Market Concentration – Related Metrics and Concepts

Market Share Rank: The ordinal position of a brand in its market, when competitors are arranged by size, with 1 being the largest.

Share of Category: This metric is derived in the same manner as market share but it is used to denote a share of market within a certain retailer or class of retailers.

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Introductory Chapter

2.3. Brand Development Index and Category Development Index – Calculations

Brand Development Index (I) = Brand Sales to Group or Households in Group / Total Brand Sales or Total Household

Category Development Index (I) = Category Sales to Group or Households in Group / Total Category Sales or Total Household

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Introductory Chapter

2.3. Brand Development Index and Category Development Index – Data Sources and Complications

Segments are often bounded geographically.

2.3. Brand Development Index and Category Development Index – Related Metrics and Concepts

CDI has also been applied to retail organizations and this measures the extent to which a retailer emphasizes one category versus others.

Category Development Index (I) = Retailer’s Share of Category Sales (%) / Retailer’s Total Share of Market (%)

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Introductory Chapter

2.4. Penetration

The measure of brand or category’s popularity.

It is defined as the number of people who buy a specific brand or category of goods at least once in a given period, divided by the size of the relevant market population.

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Introductory Chapter

2.4. Penetration – Calculations

Market Penetration (%) = Customers who have Purchased the Product in the Category / Total Population

Brand Penetration (%) = Customers who have Purchased the Brand / Total Population

*Penetration Share (%)* = Brand Penetration (%) / Market Penetration (%)

*Penetration Share (%)* = Customers who have Purchased the Brand / Customers who have Purchased a Product in the Category

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Introductory Chapter

2.4. Penetration – Calculations

EXAMPLE (Brand Penetration)

Over 1 month: in a market of 10,000 households, 500 households bought the new Big Bomb brand

Brand Penetration: 500 / 10 000 = 5%

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Introductory Chapter

2.4. Penetration – Decomposing Market Share

Relationship between Penetration Share to Market Share

Share of Requirements (see 2.5.)

Heavy Usage Index (see 2.6.)

2.4. Penetration – Data Sources, Complications and Cautions

The time period over which a firm measures penetration can have a significant impact on the penetration rate.

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Introductory Chapter

2.4. Penetration – Related Metrics and Concepts

Total Number of Active Customers: The customers (accounts) who purchased at least once in a given time period.

Acceptors: Customers who are disposed to accept a given product and its benefits – the opposite of rejecters.

Ever-tried: The percentage of a population that has tried a given brand at any time.

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Introductory Chapter

END OF PART 1

PART 2 will include:

2.5. Share of Requirements

2.6. Heavy Usage Index

2.7. Awareness, Attitudes and Usage (AAU): Metrics of the Hierarchy of Effects.

2.8. Customer Satisfaction and Willingness to Recommend

2.9. Willingness to Search

Chapter 2