Is Your Company or Product Leading or Trailing the Competition?

The market share analysis is another tool used as part of the marketing annual plan control and closely related to the sales analysis tool. Market share indicates how your company is doing in terms of unit or revenue sales compared to your competition. However, market share is perhaps the most overused and misused of marketing metrics. 

Experienced marketers downplay the role of market share or ignore it outright as their processes and ways of measuring success have evolved, making market share analysis irrelevant. However, if the metric is used correctly, in context, and for the right purpose — as with all metrics — then market share is a useful tool for short-term use.

Overall Market Share Analysis

Illustrated pie chart - hand drawn.There are several ways of calculating market share. The most common metric is the overall (or total) market share analysis. The overall market share is the percentage of a market in terms of either unit sales or sales revenue. In other words, it’s the company’s total units sold or revenue generated in comparison to the market’s competitors. 

Understanding the total market share helps marketing managers determine their total market growth or decline and helps them gain insights into trends for how customers make competitor selections. 

Organic sales growth (or the total market growth) costs a company less and is more profitable than the firm seeking to achieve growth by capturing competitor shares. However, losses in market share may signal long-term problems that require the firm to make strategic adjustments to their marketing plan. A company with a market share below a predetermined level may not be profitable, thus not a viable business. Also, firms can use shifts in their product market shares as leading indicators of future opportunities or potential competitive challenges. If a product’s market share dips below a specified level, marketers need to look at various scenarios to determine the cause for a drop in sales. Conversely, suppose sales surge, and the firm gains market share. In that case, this could indicate a problem with the competition or other potential scenarios that require closer analysis.

How Overall Market Share is Calculated

Calculating market share is a relatively simple process. However, gathering competitive data may prove arduous without the proper primary or third party research data. Assuming that you have this data, market share is calculated in two ways, as mentioned earlier: unit sales and sales revenue.

Unit Market Share is the units sold by a firm as a percentage of total market sales. The formula for unit market share is:

Market Share Analysis - Unit Market Share Formula

Revenue Market Share reflects the price of sold goods. The formula for calculating revenue market share is:

Revenue Market Share Formula - Market Share Analysis

Relative Market Share Analysis — A Better Metric

sketch art of percent signUnlike total market share, which examines the whole market, relative market share analysis measures a firm’s market share related to its largest market competitor. Tracking relative market share over time gives you a benchmark and better understanding of what’s happening between you and your largest competitor. Relative market share allows marketing managers to compare relative market positions across different product markets. 

A company or product with a relative market share of 100 percent is considered tied for the lead with its largest competitor in that market. Anything more than 100 percent indicates a market leader, and less than 100 percent shows the firm behind the market leader. The relative market share can help a company better understand its position or product position in the marketplace with more meaning than the total market share. 

Like total market share, relative market share is calculated by either the brand’s product units sold or revenue generated. The formula for the relative market share calculation is:

Relative Market Share Formula - Market Share Analysis

Market Share Analysis Challenges and Assumptions

Market Share Analysis Assumption Illustration of two men with question mark.While market share, precisely relative market share, is an excellent metric to measure your firms or brand’s leadership or lack of in a given market against competitors. It is not without challenges. Conclusions from market share analysis come with several assumptions. 

First, the assumption that external forces affect all companies in the same manner, is often without merit. For example, the U.S surgeon generals notice the harmful effects smoking has on the body depressed total cigarette sales but did not affect all companies equally.

The assumption that a firm’s performance should be judged against all firms’ average performance is not always correct. The best way to evaluate a companies performance is against that of its closest competitor. 

The assumption that if a new firm enters the industry, then all existing firm’s market share may drop. A decline in market share does not necessarily mean that the company is performing worse than other companies. Share loss depends on what degree the new firm enters the company’s specific markets.

The assumption that a market share decline is deliberately engineered to improve profits. For example, marketing managers may drop unprofitable customers or products to reduce costs by driving up profits.

The final assumption is that market share can fluctuate for many minor reasons. For example, market share is affected by changes in promotional strategies because a massive promotional sale on a given date affects market share. It may also be affected by social and cultural phenomena like a sales spike for Ocean Spray Cran-Raspberry drink when a video went viral, showcasing a man skateboarding and consuming the beverage.

The Takeaway

Market share is undoubtedly a critical metric to measure. However, marketing managers must throw caution to the wind when using the metric. In other words, marketing managers must use the metric correctly, in context, and for the right reason for it to be a useful analytical tool to guide marketing performance. While overall market share provides a high-level view of where the organization or organization’s product falls compared to the competition in the same market, relative market share is a better indicator of whether a firm or product is leading or lagging behind its closest competitor.

Understanding the Marketing Control Process

If you are like most small to mid-sized businesses, marketing your company probably includes a basic marketing plan, most likely not written down. You probably have some marketing collateral (brochures) to leave with customers, a website, a social media presence that gets occasional attention, and a sales team. Like a sales analysis performed monthly or quarterly, there may be some control mechanism to determine if you are generating enough revenue to cover costs and earn a profit. If you are like most other firms your size, you are probably falling short of your marketing control process, that is, tools that help you analyze and assess your marketing activities.

What is Marketing Control?

Marketing control is a process where company management or executives analyze and assess their marketing activities and programs. Management then uses the results to make necessary adjustments or changes to their marketing plans. Think of marketing control as the navigation system on an airplane. The pilot sets the course, and the navigation system directs the plane toward its destination. However, due to weather patterns, the plane can drift off course, and the pilot must make adjustments to keep the aircraft on its path, or it can end up in a completely different location. If you are not monitoring your marketing activities and making adjustments along the way, you can end up spending too much money, generating no sales, or both.

For example, if a marketing manager implements a marketing campaign to increase sales for a specific store or product, that manager or their team monitors the campaign plan’s progress over a specified amount of time. The amount of time could be one week, a month, or quarterly. The marketing activity could be sales promotions, direct sales for retail floor staff or online ad spend, and conversions on their e-commerce store. If the campaign is not helping the marketing team achieve their established goals based on the team’s analysis, they will make corrections to any one of their campaign’s tactical elements. The process of monitoring and making adjustments to a marketing activity is the marketing control process.

The Marketing Control Process

As with any other business function, there is a process to follow that ensures the marketing control process’s effectiveness. Precisely, the process associated with the annual-plan control (see the explanation of annual plan control below). The process steps include:

  1. Goal setting – What do you want your campaign or activities to achieve?
  2. Performance measurement – How is the campaign performing. What precisely is happening. As an example, are you receiving more conversions on your eCommerce website? Are you generating more sales revenue?
  3. Performance diagnosis – Why is what’s happening occurring? If you are not receiving the projected sales volume, what would you attribute the reason to? What if you are earning more than projected sales? Could it be that your pricing is too low?
  4. Corrective Action – How will you correct the problem? If your marketing campaign performs lower than expected, what changes can you make to fix the issue? Were your goals unrealistic, or did you miss your target marketing?

diagram showing the four seps in the marketing control process by Allen Stafford

4 Types of Marketing Control

 There are four types of marketing control marketing managers can use to accomplish their analysis of marketing campaigns:

  1. Annual Plan Control
  2. Profitability control
  3. Efficiency Control
  4. Strategic Control
Control TypeResponsible PartyControl PurposeApproaches
Annual Plan ControlSenior Managers and Middle ManagersDetermine if planned marketing results are meeting expectations• Sales analysis
• Market share analysis
• Sales-to-expense ratios
• Financial analysis
• Market-based scorecard analysis
Profitability planMarketing managerDetermine where the firm is earning profits and where they are losing money.Determine profitability for:
• product
• territory
• customer
• segment
• trade channel
• order size or basket size
Efficiency controlLine and staff management and marketing managerDetermine marketing expenditures impact by examining and improving the spending efficiency.Determine efficiency by:
• sales force
• advertising
• sales promotion
• distribution
Strategic controlSenior managers and Marketing manager or auditorDetermine if the business is following the best options with respect to markets, products, and channels.• Marketing effectiveness rating instrument
• Marketing audit
• Marketing excellence review
• Company ethical and social responsibility review

Source: Principles of Marketing, 17th Edition. Kotler and Anderson

Annual Control Plan

Annual plan control is responsible for ensuring that the company reaches its financial and other goals. Financials include sales revenue and profits. Using the marketing control process, the marketing management team establishes its monthly, quarterly, semi-annual, and annual goals. Second, they monitor the performance of their goals in the market environment. Third, if there are any deviations from the objectives, management analyzes the problems to determine what and why it’s happening. Fourth, management works to close any gaps between the issue and its goals.

There are four tools for measuring the annual control plan:

  1. Sales analysis
  2. Market share analysis
  3. Marketing expense-to-sales analysis
  4. Financial analysis

Profitability Control

The profitability control is where a company measures its products, regions, customer segments, and order sizes to help decide if they need to expand, reduce, or eliminate any products, services, or territories. The instrument used to determine the profitability measurements is a marketing profitability analysis.

Efficiency Control

Efficiency control’s primary purpose is to use the data from the profitability analysis to educate the marketing staff on the implications of the marketing decisions made for the campaign. 

The profitability analysis may reveal that the firm is earning weak profits on certain products, promotions, stores, or territories. Marketers may face decisions that include determining if there are efficient ways to manage the sales force, advertising spend, sales promotions, or distribution channels.

Strategic Control

The final part of the marketing control tool is strategic control. From time to time, marketing managers should reassess their strategic approach to the market environment. The approach managers use for reassessing the market environment is the marketing audit. The marketing audit is a comprehensive, systematic, and independent examination of a company’s marketing environment. It also includes the company’s marketing objectives, strategies, and activities. The goal is to determine the firm’s challenges and opportunities to recommend a strategic plan of action that helps improve the company’s marketing performance.

The Takeaway

Marketing is not just the arts and crafts department; it’s a control center that analyzes processes and makes adjustments to create efficient processes that yield business results. Without a marketing control process and the analysis tools that accompany the process, your business may lose sales and profits. It is up to the business owner or marketing manager to implement the marketing control process, manage the process, analyze, and make corrections to the strategic marketing plan.

 

Sales Analysis

In the article titled The Marketing Control Process for your Business – Explained, I outline what marketing controls are: 

“Marketing control is a process where company management or executives analyze and assess their marketing activities and programs.”

Hand-drawn graph for sales analysis post - Allen StaffordThe marketing control process includes four types of marketing control, they are,

  • Annual plan control
  • Profitability control
  • Efficiency control 
  • Strategic control 

This post focuses on the sales analysis part of the annual control plan. The other three types of measuring tools that fall under the annual control plan include,

  • Marketing share analysis,
  • Marketing expense-to-sales analysis,
  • Financial analysis.

The sales analysis measures and evaluates the firm’s actual sales as it relates to their sales goals. The two types of analysis tools used are the sales-variance analysis and the micro-sales analysis.

Sales-Variance Analysis

A sales-variance analysis is a metric that measures the relative contribution of different internal and external factors to a discrepancy in sales performance. The ability to calculate and identify sales variance is an essential metric to understand so that the firm may address issues in expected sales deficiencies.  

Sales-Variance Example

Suppose a manufacturer planned on selling 2,000 units of Product A in the fourth quarter at $2.50 per unit. The expected total revenue is $5,000. However, at the end of the fourth quarter, 1,700 Product A units were sold at $1.95 per unit for a total revenue of $3,315. The calculation below shows how much sales performance is due to a price decline and how much is due to a volume decline. 

Sales-Variance Example Calculation

Variance due to price decline:($2.50 - $1.95) (1,700 units) = $93555.5%
Variance due to volume decline:($2.50) (2,000 - 1,700) = $750 44.5%
$1,685100%

Metrics Analysis

Notice that almost half of the variance is due to a failure to achieve the volume target. The manufacturer needs to examine why sales failed to reach its expected sales volume. Possible reasons may include poor sales performance, lack of sales staff to cover a region, inferior quality product, or weak or no sales promotion activity. 

Micro-Sales Analysis

pie chart for micro-sales analysis articleThe micro-sales analysis examines specific products, sales regions or territories, and other measurable factors that underperformed the expected sales goals. For example, imagine that the manufacturer in our case above sells Product A into three regions. They set their sales goals for region one at 900 units, region two at 400 units, and region three at 700 units for the fourth quarter. However, the actual sales volumes were 800 units for region one, 498 units for region two, and 325 units for region three. Thus, the sales manager notices a 12% sales reduction for region one, a 22% increase in region two, and a dramatic 73% drop in region three sales.

From the data, the sales manager may come to several possibilities. They may conclude that the salesperson in region three is performing poorly, a new competitor entered the market in that region, or the product is priced too high for the market. Other possibilities may come into play as well.

The Takeaway

The sales analysis is just one tool for managing marketing programs. When used to analyze sales volumes, marketers can learn if internal or external factors are to blame for sales volume deficiencies or surpluses. The data collected can help marketers make adjustments to existing marketing programs as well as used to incorporate them into new programs in new markets.

 

To improve your customer engagement strategies, “Ask not how you can sell, but how you can help.”
-Kellogg School of Management

 

Mass Marketing: Marketing from the Past

If you do not have a customer engagement marketing strategy, you miss out on opportunities to build your brand and grow your business. Businesses engaging their customers are also involved in customer relationship management. In other words, they are improving their brands effectively and quicker by managing their relationships with customers. Companies that operate under the old way of marketing are not effective at managing customer relationships and thus miss the mark in gaining valuable custom insights through customer engagement.

The way companies marketed in the past was a one size fits all strategy. The old way included mass marketing brands to broad segments of consumers. It’s sort of like casting a wide net into the vast ocean, hoping to catch a few fish, and as we have all heard by now, “hope is not a strategy.” At least I “hope” you have heard that quote.

A mass marketing approach created challenges for brands. Marketers had limited channels for customer involvement, if any, at all. Brands had little interest in customer involvement. Direct customer communication was practically non-existent, and marketers missed opportunities to profoundly and intimately engage with their customers’ needs and wants. Also, non-existent with the old marketing method was collecting any customer data or sentiment they had toward a brand and its products. Firms could not capture those insights that could lead to improved customer service or new product ideas, like Cake pops and Pumpkin Spice latte products that consumers created on Starbucks customer engagement platforms

Customer Engagement Marketing

The internet and mobile devices gave rise to a new marketing paradigm known as customer engagement marketing. Customer engagement marketing nurtures direct and continuous customer involvement in shaping brand conversations, experiences, and community. Customer engagement marketing leads to brands creating meaningful brand stories to make the brand a significant part of consumers’ conversation and life. A great example of customer-engagement marketing is the Dove brand

Dove’s Real Beauty Campaign targets women of all ethnicities and allows them to directly engage via Dove’s social media pages. Dove’s Real Beauty Sketches campaign, a video depicting how women view themselves and how others see them, launched in 2013 and has received almost 69-million views on their YouTube channel. The campaign video has generated conversations from thousands of consumers that range from positive to negative responses. By allowing consumers a platform to voice their opinions through their social media channels, Dove can gain valuable insights about their consumers and provide a medium for consumers to engage with the brand. Dove’s customer engaged marketing makes the brand a meaningful part of the consumers’ conversation and lives.

What Drives Customer Engagement Marketing?

Ever since Tim Burns Lee created the first graphical web browser in 1991, businesses began populating the internet with their webpages. As consumers started to shop online, and social media took root, consumers became better informed about brands. They were more connected and empowered as consumers because they had a platform to voice their likes, dislikes, and opinions about brand products. Social media took away the power of marketing from brands and handed it to consumers. In turn, brands are engaging customers in ways that help forge and share their brand experiences.

Because consumers are more empowered than before, brands need to create market offerings and messages that engage consumers and not interrupt them as they once did with the mass marketing approach. Brands need to listen to customer sentiment and provide feedback as needed. Companies can do so through various customer engagement platforms, such as:

  • Social media sites: LinkedIn and Facebook
  • Microblogs: Twitter and Instagram
  • Video: Youtube
  • Blogs: Your company blog
  • Mobile apps: Most social brands have apps that allow customer-engagement
  • Consumer-generated review systems: Yelp

All of these platforms help brands entice customer engagement on a personal, interactive level.

sketched light bulb icon

The Key to Customer Engagement Marketing

There is no magic formula for customer-engagement marketing. The key is to find ways to enter target consumers’ conversations with engaging and relevant brand messages. Merely posting a random, funny video, creating a social media page, and not staying consistent with posts, or hosting a blog isn’t enough. Marketing managers need to understand their customers and the high target value social sites where their customers congregate.

Offer Real Value

An excellent place to start is to offer customers real value. Rather than providing only product information, create meaningful content that adds value to your customer’s life. For content to be valuable, the brand needs to connect to that content legitimately. Looking back at the Dove Real Life Sketches example, the brand can legitimately connect with the content. Dove produces beauty products, and women buy those products, and the campaign speaks to women about their perception of beauty.

Inspire People

Customers want real information and education about brands, but they also wish to be inspired. Airbnb’s Cheers to Ten Years of Hosting video inspires its customers while providing informational content. 

Provide Entertainment Value

A brand can inform and inspire, but it also needs to entertain. The “stickiness” of a brand’s engagement message comes from its entertainment value. The stronger the entertainment value, the more your customer will remember and get engaged. Take a look at Always’ inspiring, yet entertainment video for their #likeagirl campaign. They deliver a powerful message that informs, educates, inspires, and entertains.

Be Consistent

You can have the best intentions as a brand, but if you are not consistent in delivering your message, your customers will not engage with your brand. Develop a brand engagement calendar that includes content posting days and times, and your company’s communication channels to engage customers.

 

Remember, not everyone wants to engage deeply or regularly with every brand. Successful customer engagement marketing means making relevant and genuine contributions to target consumers’ lives and interactions. For customers that want to engage, you will gain valuable insights. For customers who do not wish to engage with your brand, your content will reinforce your brand story and message.

[VIDEO TRANSCRIPT]

Mystery can increase your sales!

That’s right.

Being mysterious with your product or service can increase the likelihood of more sales, which, well, as we know can increase your bottom line.

And this translates into more money in your pocket or your businesses pocket.

How is this possible, you ask?

After all, isn’t something mysterious or uncertain considered, a risk or Unpleasant?

Well, not exactly.

You see,

In a Journal of Business Research study,

researches conducted two experiments that demonstrated when a business, often a retail business, incorporates mystery in their marketing strategy; they increased the likelihood that consumers will make a purchase.

Hmmm, that sounds pretty mysterious.

Companies like Groupon, Banana Republic and American Airlines are just a few organizations that have used mystery to pique the interest of customers and drive their sales upward.

So, how does this work, you ask?

In one experiment, researches told their subjects that they would receive one of three items for a small shipping fee of just $10.

The researches also showed the participants a list of potential items they may receive.

The items included a board game, a handmade necklace, or the latest version of a piece of software.

They also showed pictures of products previously sent to customers, like a low-quality camera, gloves, and a remote control car. So the first group was armed with information about their potential mystery gift.

In a second group experiment, participants received less information about the mystery product they may receive. The only thing that researchers told them was that the item was guaranteed to be worth at least $10 MSRP, that’s manufacturer suggested retail price,

And if it were not worth at least $10, the shopper would be refunded their $10 shipping fee.

In both studies, researchers found participants had increased levels of curiosity after exposure to the mystery product. This, in turn, led to an increase in purchase motivation.

It is also worth noting the absence of information in the second experiment, where the participants did not receive the extra information about the mystery gift, did not significantly decrease the motivation to make a purchase.

So, if you provide a little information about the mystery gift, there may be a slight advantage, but not a significant amount as compared to the group that did not receive information about the mystery gift.

So, how can you apply the mystery study to your own business and reap the rewards of endless profit?

Okay, it may not be endless profit, but you may boost your sales and gain the financial rewards that many other retailers enjoy when exercising mystery in their marketing strategies.

An Example of Using Mystery in Your Marketing Strategy

An example may include a small retail store selling a specific product, like beauty supplies. Perhaps you offer a small mystery gift with every $20 purchase of your product. Remember to identify the possible mystery gifts available to your customer and that the mystery gift has a perceived MSRP of at least $20. It doesn’t have to cost you $20; It must have a perceived value of $20.

The mystery marketing strategy can be applied to almost any business or product with a little imagination.

If you try this strategy, I would like to hear about it and what worked and what may not have worked. And, if you found this information useful, please hit the like button or share it with someone who may find it equally useful.

Thanks for watching. I’m Allen Stafford for the Stafford Group.

 

Research Source

Krista M. Hill, Paul W. Fombelle, Nancy J. Sirianni,
Shopping under the influence of curiosity: How retailers use mystery to drive purchase motivation,
Journal of Business Research,
Volume 69, Issue 3,
2016,
Pages 1028-1034,
ISSN 0148-2963,
https://doi.org/10.1016/j.jbusres.2015.08.015.
(http://www.sciencedirect.com/science/article/pii/S0148296315003525)