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Market Share Forecasting involves forecasting the total market
and your own consumption, and estimating the share of the market.
In the retailer to consumer model, what matters most is the shelf
take-away. Marketing Strategies aim to maximize shelf consumption
(and usage) and increasing own share of that consumption.
Determining Market Share
Sources of Retail Consumption Data - Coverage Factors
Introduction
Market Share Forecasting involves forecasting the total market
and your own consumption, and estimating the share of the market.
In the retailer to consumer model, what matters most is the shelf
take-away. Marketing Strategies aim to maximize shelf consumption
(and usage) and increasing own share of that consumption.
Depending on the industry, forecasting the total market for a
particular product may be as easy as obtaining it from the external
sources to estimating and validating market estimates through
a series of forecasts involving syndicated data and POS data.
Determining Market Share
Share estimates of the total market can be done as an objective
or a target market share estimate based on the promotional plans
and budgets committed to achieving that share. The other option
is to forecast consumption independently and derive the share
through two different estimations, namely the market and the consumption.
| In simple terms, your market share equals total retail
take-away of your products divided by the total market
potential. This is just a calculation of your share of the
total retail sales.
Your total retail sales depend on which segment you
participate in and who the other players are in that
segment. Retaining and growing your share depends on a
number of marketing factors including product
differentiation, advertising, brand value, etc. The size and
the marketing budget of your competitors also are key
determinants of your market share.
For example, let us say, you are a baby car seat
manufacturer. Let us further suppose you compete in
the basic seat segment of the market and the price of the
basic seat is $40 per unit. If you own 50% of the basic seat
market, which is 2m units, then your total annual retail
sales is 1m units compared to a total market of 3m units.
Your share of the infant car seat market is then 33.3%.
We can calculate the dollar share using the following
steps:
1. Your retail dollars equal your retail unit sales x
your average price. In this case, your dollar retail sales
is given by 1m units x $40, which gives $40m.
2. The total dollar market potential is $130m (calculated
above).
3. Your dollar market share is then $40m over $130m which
is 31%.
Although your unit share is 33.3%, the dollar share is
31% because you play in the low-price segment of the market.
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The Marketing Plan is an outline of your strategy to
increase your market share. It may cover a number of
marketing and brand building techniques as well as the
budget dollars allocated to each activity. Generally, the
following tools are used to retain/gain market share:
1. Advertising and Sales programs to increase unit share
while keeping prices constant.
2. Building Brand Value to move to the high-end segment
of the market. This will result in higher selling prices
without hurting unit sales. (In our example, you may be able
to sell the same basic seat for $45 because consumers are
willing to pay a premium price for your brand.)
3. Sales Promotions through discounts and coupons will
increase unit share but may compromise the dollar share.
4. Aggressive Price cutting may also be used as a
strategy to capture a higher market share from your
competitors.
5. The last and perhaps the most often used strategy in
the Consumer Packaged Goods sector is to capture market
share through new product introductions. |
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