Can market share analysis really help drive your business? Louise Rogers reveals why it can be one of your most powerful tools.
Well-honed market share analysis can be one of the most telling, insightful, pragmatic and practical data weapons any business can deploy.
Market share tells us so much more than simply how we’re doing ourselves or about our competitive position. Done well, it also tells us about overall market trends. It also potentially provides insights on our sales performance, pricing, products, brand perception, regional differences and more.
The right data can tell you how valuable your individual products really are, and can also reveal deeper analysis. For example, whether your proudly-held, impressive share, is actually in the least valuable part of the market – or the exact opposite. It will help you understand where you sit within all nuances of the market – whether it’s free, paid, shared, growing or dying.
There’s simply nowhere to hide if you measure market share properly, consistently and with the right frame of mind.
It is not about making you feel better about your business
Market data will tell you the good news you want to hear if it is there. But it is more important to use market share to starkly confront yourself with your core weaknesses and threats, as well as to see where opportunities lie.
More than once, I have run market analysis in completely different sectors, which highlighted competitors with hugely underwhelming commercial success, but a dangerously high share of content, traffic and inventory – an explosive combination. Those findings made us react differently and take far more notice, than if we had not seen their position in that light.
It is also important to understand what market share means for your bottom line.
It’s one thing to understand how your share has increased, but it is too easy to overlook a one per cent decline unless you are looking for it. Yet for most businesses, just a five per cent shift in share in the wrong direction is a body blow. I want to know at the first percentage point drop. Not the fifth when it could be too late to turn the tide.
The right data analytics will also distinguish early between the market growing and contracting, and your share growing and contracting. Clearly, very different things.
We have all had long debates about why a business is growing or not. It is quite common – especially in younger, smaller businesses, or bigger dominant ones – to see your growth or contraction and infer from that an overall trend in the market. Whereas in fact, the market might actually be acting in exact contradiction to your performance. Good market share data unpicks the myths and legends, and starkly presents the home truths I need to challenge our performance.
Invest in the right team and tools
It is essential to invest in a team to own the data and wake up every morning thinking of only that. It is not cheap to do – good data analytics people are well paid and hard to find. Without insistence from the CEO, it never seems to find space in the budget. This is why so many companies neglect this function.
Where you get the data from is obviously industry dependent. There are online data analytics tools everyone uses. I would also – at a minimum – supplement this with a good customer survey. But don’t survey your own customers. It is much more relevant to take a cross-section of a particular customer base, and find out where you sit within that. Everyone first falls into the trap of asking their own customers whether they like them or not. Well, you can guess what the answer tends to be.
You might use a survey company. For something more in-depth, you might turn to a management consultant where the best data-minds tend to reside. For any company that will eventually be sold, bear in mind the buyers will definitely do this. I would rather know the answers before they do.
If I was considering acquiring a business, I would do an enormous amount of granular market share analysis. When running a business, our data team would be triangulating several sets of data. This may be a combination of web analytics, individual market data, regular scrapping and deduping and data from specialist companies that look deeply into the sector.
I also think it is almost impossible to get it right the first time. The more you do it, the better you get at it and the more you think of different ways to find out what’s going on.
Avoiding the pitfalls
The potential biggest mistake is not measuring the market accurately by tracking the wrong set of competitors. I’ve lost count of the number of times I’ve looked at market share that is only measuring performance against a narrow set of competitors, who happen to be doing exactly the same thing in exactly the same way as the target company.
But to determine who your competitors are, you need to look at it from your customers’ perspective. Who are they buying from, using, relying on? I need to understand what my customers are interested in, as well as what the people who I wish were my customers are interested in.
You should also track bigger companies that encompass your market, even if it is a tiny bit of what they do. I’ve missed players before because they’ve done something very different, but overlap us in some way. But if they’re starting to move into your territory, you need to be ready and proactive.
Same goes for the social media players. Are they stealing your customers without you really understanding how? Or are you disregarding them because they are taking your customers, but not your cash (for now)?
It all goes back to the point – who is your customer? And who do they think of as your competitors?
Another consideration is that products, sales and customers can often flow between competitors. Having a sophisticated view of whether you lost or gained customers to or from another player is incredibly valuable.
Gathering a lot of data across many players is also a good way of tracking potential acquisitions. You can start to see trends in the smaller players and figure out who you admire, and who scares you.
Don’t underestimate the small fish
If you’re a big company, it can be difficult to track the startups emerging and innovating in your space. That little company may only have five people working from the proverbial garage in Silicon Valley. But if they’ve got better products, or are quicker on their feet, they could become an interesting player – and you need to know about them early.
How often have businesses been eaten up by monsters who we don’t even recognise as being from the same species?
And they don’t have to get that big to cause you real pain, so in some ways tracking their market share is just as important.
Asking the right questions to make you feel uncomfortable
At the end of all that, market share data is only useful if you ask the right questions. Not just the ones that you want to know the answer to and are front of mind, but the big questions that can tell you exactly where you’re going. What does this data tell me that I haven’t asked? What does this data tell me that is surprising? Tell me something I didn’t know!
Ultimately it’s not about making you feel comfortable. In some ways, there should always be something that makes you feel deeply uncomfortable.
There’s a big difference between surveying your marketplace to prove you’re doing a good job and driving your marketing message – versus market share analysis that finds out where you’re doing a bad job and where you could do better.
Finally, it is not a one off. Too many companies treat market share analysis like Christmas – a big annual party which takes ages to get together, costs a fortune and then is all forgotten about until next year. I think it should be more like taking up a new sport. Constant practice and dedication are required – and a good coach to get you there.
