Marketing Matters - Marketing Metrics Training Series (Part 2B: Market Share)

Marketing Metrics

Chapter 1:Introduction

Chapter 2: Market Share

Part II

Marketing Metrics

Chapter 2: Share of Hearts, Minds and Markets

Chapter 2PART 2

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

Introductory Chapter

2.5 Share of Requirements – Definition and Purpose

PURPOSETo understand the source of the market share in terms of breadth and depth of consumer franchise, as well as the extent of relative category usage (heavy users with larger customers versus light users and smaller customers).

DEFINITIONA given brand’s share of purchases in its category, measured solely amongst customers who have already purchased that brand. Also know as Share of Wallet.

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2.5 Share of Requirements (Share of Wallet)

Calculated solely among the buyers of a specific brand

Key measure of loyalty

Guide a firm’s decisions on whether to allocate resources towards:

Expanding a categoryTaking customers from competitors Increase share of requirements amongst established customers


2.5 Share of Requirements – Calculations

Unit Share of Requirements (%) = Brand Purchases / Total Category Purchases by Brand Buyers

Revenue Share of Requirements (%) = Brand Purchases ($) / Total Category Purchases by Brand Buyers ($)

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2.5 Share of Requirements - Calculations (EXAMPLE)

In one month, the unit purchases of AloeHa brand sunscreen came to 1,000,000 bottles. Among the households that bought AloeHa, the total purchases of Sunscreen (category) came to 2,000,000 bottles:

Share of Requirements = AloeHa Purchases / Category Purchases by AloeHa Customers

1,000,000 / 2,000,000 = 50% (share)

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2.5 Share of Requirements – Calculations (Market Share)

Analysing the overall market share:

Market Share = Penetration Share x Share of Requirements x Heavy Usage Index

Therefore Share of Requirements can be calculated indirectly by decomposing market share:

Share of Requirements (%) =Market Share (%) / [Penetration Share (%) x Heavy Usage Index (I)]

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2.5 Share of Requirements – Data Sources, Complications and Cautions

Double Jeopardy: Marketers strive for a “niche” position that yields high market share through a combination of low penetration and a high share of requirements.Difficult to achieve a high share of requirements without also attaining a high penetration share.It can be difficult for customers to maintain loyalty to brands with low market share

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2.5 Share of Requirements – Related Metrics and Concepts

Sole Usage - the fraction of a brand’s customers who use only the brand in question

Sole Usage Percentage – the proportion of a brand’s customers who only use that brand’s products and do not buy from competitors. They are die hard, loyal customers.

Sole Usage (%) = Customers Who Only Buy the Brand in Question / Total Brand Customers

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2.5 Share of Requirements – Related Metrics and Concepts

Number of Brands Purchased – marketers consider the average number of brands purchased by consumers of that brand versus the average number purchased by all customers in that category.

Repeat Rate – The percentage of the brand’s customers in a given period who are also brand customers in the subsequent period.

Repurchase Rate – The percentage of customers for a brand who repurchase that brand on their next purchase occasion.

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2.6 Heavy Usage Index – Definition

The ratio that compares the average consumption of products in a category by customers of a given brand with an average

consumption of products in that category by all customers for the category

The measure of the relative intensity of consumption. Indicates how heavily the customers for a given brand use the product category to which the brand belongs, compared with the average customer for the category.

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2.6 Heavy Usage Index – Purpose

To define and measure whether a firm’s consumers are “heavy users”

When a brand’s index is greater than 1.0, this means that its customers use the category to which it belongs more HEAVILY than the average customer for that category.

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2.6 Heavy Usage Index – Calculations

Heavy Usage Index (I) = Average Total Purchases in Category by Brand Customers / Average Total Purchases in Category

by All Customers for That Category

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2.6 Heavy Usage Index – Data Sources, Complications and Cautions

Does not indicate how heavily customers use a specific brand, but only how heavily they use the category.

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

Features a range of questions that aim to shed light on customer’s relationships with a product or brand.

“Who are the acceptors or rejecters of the product?”

“How do customers respond to a replay of advertising content?”

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

To track trends in customer attitudes and behaviour.

Customers pass through a particular process in the Hierarchy of Effects:

Lack of awarenessPurchase of the productBrand loyalty

AAU Metrics are designed to track these stages of knowledge, beliefs and behaviours and may also track “who uses the product?”

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

Awareness the percentage of potential customers or consumers who recognize a given brand.

Top of Mindthe first brand that comes to mind when a customer is asked an unprompted question about a category.

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

Ad Awareness the percentage of target customers or accounts who demonstrate awareness of a brand’s advertising.

Brand/Product Knowledgethe percentage of surveyed customers who demonstrate specific knowledge or beliefs about a brand or product.

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

Combination of what customers believe and how strongly they feel about it.

Attitudes/Liking/ImageA rating assigned by consumers (normally 1-5) when survey respondents are asked their level of agreement with propositions such as – “This is a young brand”

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Perceived Value for MoneyA rating assigned by consumers (scale of 1-5) when survey respondents are asked their level of agreement with propositions such as – “This brand usually represents good value for money”

Perceived Quality/EsteemA consumer rating (scale of 1-5) of a given brand’s product when compared with others in its category or market.

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Relative Perceived Quality A consumer rating (scale of 1-5) of a brand product compared to others in the category/market.

IntentionsA measure of customer’s stated willingness to behave in a certain way.Questions such as – “Would you be willing to switch brands if your favourite is not available?”

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Intention to PurchaseA specific measure or rating of customer’s stated purchase intentions.Information on this subject is gathered from the responses to surveys with propositions such as – “It is very likely that I will purchase this product”.

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

USAGEa measure of customer’s self reported behaviour.

Purchase frequency and units per purchase.

Seek to determine how many have “rejected the brand” and how many have “adopted” the brand into a regular portfolio of brands.

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2.7 Awareness, Attitudes and Usage (AAU): Metrics of the Hierarchy of Effects – Data Sources, Complications and Cautions

Data Sources Include:Warranty Cards and Registrations – using prices and random draws to encourage participation

Regular Administered Surveys – conducted by organizations that interview consumers via telephone, mail, web and other technologies.

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DATA COLLECTION

Certain techniques in data collection and review can help managers distinguish between seasonality effects such as:

“noise” – random movement“signal” – actual trends and patterns

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The following techniques are used:

Adjust for periodic changesTry to separate customer from non-customer responsesTriangulate customer survey dataSeparate leading from lagging indicators

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2.7 Awareness, Attitudes and Usage (AAU): Metrics of the Hierarchy of Effects – Related Metrics and Concepts

LikeabilityQ Score rating of likeability:

Derived from a general survey of selected households in which a large panel of consumers share their feelings about brands

Segmentation by Geography or Geo-clusteringInsight into customer attitudes can be achieved by separating data into smaller, more homogeneous groups of customers.

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2. 8 Customer Satisfaction and Willingness to Recommend

Customer SatisfactionFocus employees on the importance of fulfilling customer’s expectations – when these expectations aren’t fulfilled, they warn of problems that can affect sales and profitability.Measured at the individual level but reported at an aggregate level.

Willingness to recommend When a customer is satisfied with a product, he or she might recommend it to friends, relatives and colleagues – powerful marketing advantage.

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2.8 Customer Satisfaction and Willingness to Recommend - Purpose

Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty.

The principal use is twofold:It is important to tend to customers and ensure they have a positive experience with the company’s goods and services. Expectations are a key factor in satisfaction.Market share may show the current performance of a firm. Satisfaction is the best indicator of how likely it is that the firm’s customers will make further purchases in the future.

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2.8 Customer Satisfaction and Willingness to Recommend – Data Sources, Complications and Cautions

DATA SOURCES

Surveys constitute the most frequently used means of collecting satisfaction data.

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COMPLICATIONS

“Response bias”Disappointed or angry customers often welcome a means to vent their opinions and satisfied customers do not.

Sample selections may distort satisfaction ratings in other ways as well.

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CAUTION

Must be careful when defining customer satisfaction as “meeting or exceeding expectations” as expectations may

change over time.

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2.8 Customer Satisfaction and Willingness to Recommend – Related Metrics and Concepts

Trade Satisfactionfounded upon the same principles as consumer satisfaction and it measures the attitudes of trade customers.

Number of ComplaintsThe number of complaints lodged by customers in a given time period.

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2.9 Willingness to Search – Definition

The likelihood that customers will settle for a second-choice product if their first choice is not available

The percentage of customers who are willing to leave a store without a product if their favourite brand is unavailable.

[Also known as “accept no substitutes”]

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2.9 Willingness to Search – Purpose

To assess the commitment of a firm’s or brand’s customer base.

Brand or company loyalty is a key marketing asset.

Marketers must evaluate aspects of it through a number of metrics

re-purchase rate share of requirements, willingness to pay a price premiumand other AAU measures

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Tells a company about the attitudes of its customers and whether its position in the market is likely to be defensible against sustained pressure from a competitor.

Willingness to Search (%) = Percentage of Customers who Delay Purchases, Change Stores or Reduce Purchase

Quantities in order to Avoid Switching Brands

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Customer Loyalty is grounded in a number of factors

Satisfied and influential customers who are willing to recommend.Hidden values or emotional benefits which are effectively communicated.A strong image for the product, the user or the usage experience.

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2.9 Willingness to Search – Data Sources, Complications and Cautions

Consumers who are loyal to a brand in the sense of rarely switching may or may not be willing to pay a price premium OR recommend it to friends.

Different products generate different levels of loyalty – must look for category specific norms.

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2.9 Willingness to Search – Data Sources, Complications and Cautions

Degrees of loyalty also differ with demographic groups. Older consumers have been shown to demonstrate the highest loyalty rates.

Customer loyalty remains one of the most important metrics to monitor as well as one of the trickiest to assess truly.

Marketers must understand the worth of their brand in the eyes of the customer and retailer.

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END OF CHAPTER 2:

PART 2

Chapter 2

Business

Marketing Matters - Marketing Metrics Training Series (Part 2B: Market Share)