"Gaining market share is often top-of-mind for many executives. It is a simple metric to understand and visualize, it is usually tracked on an industry-basis and it usually communicates a sense of achievement when the share numbers are looking good. However exclusive focus on market share can also mask numbers that really count – profitability or long-term brand health.....
Market share is available for the taking today. Customer attitudes and behaviors are shifting and many competitors are vulnerable. The easiest thing seems to be to cut price and gain volume and share. However the more sustainable and profitable way to gain share is to understand the new needs of customers and innovate (product, shopping, engagement, etc.) to meet these new needs better than competitors....
While most companies have had to rapidly develop a strategy to address the low-end of the market as customers down-trade across categories, here are some thoughts on how to implement such a strategy, without hurting the entire portfolio:
- Use segmentation to inform your strategy: Not all customers down-trade to cheaper options for the same reason.
- Take a portfolio approach: Many marketers in today’s environment are investing heavily in their entry-level or low-priced products/brands. While this seems relevant given customer behavior for down-trading, lopsided investments will only accelerate the down-trading. Marketers have to equally invest in other brands in their portfolio and give a strong reason for customers to stay with the premium brands.
- Use bundling to average-out the margin: A low-priced product can be used to attract the customer but it can be bundled with other add-ons,
- Leverage design to maintain differences: Customers should be able to instantly tell the difference between an entry-level, mid-range and higher-end product.
- Have a well-defined role for your entry-level brand: It is important therefore to have a medium to long-term goal for the entry-level product, its role in the portfolio and the contribution that it will make to the overall profitability of the company."
"It used to be that a business transformation was a once-in-a-lifetime event, the sort of fundamental reset prompted by a rare, short-lived disruption such as a new technology, a devastating scandal, or a dramatic shift in costs. But if the recent economic upheaval reveals anything, it is that companies of all sizes, in all industries, are operating in a more volatile, less predictable environment, and that change has become a way of life. To navigate such a rocky landscape, companies must be ready to repeatedly transform themselves — indeed, to institutionalize the capacity to alter strategies again and again — as business conditions require.
Each company’s strategy for approaching transformation falls into one of three categories. These categories in turn determine the level of transformation — the timing and the magnitude — that the company can support.
1. Reactive. This is the default transformation strategy; it is minimal, and has become second nature to most seasoned executives. A change in circumstances provokes a short-term response, generally an abrupt shift that requires little cross-company coordination or follow-up
2. Programmatic. This strategy is more comprehensive and is appropriate when major change is required and a company has sufficient lead time. In such circumstances, the company launches a widespread change initiative across the lines of business that are most affected
3. Sense-and-adjust. This is the most long-term and sustainable strategy, but only a few companies have successfully implemented it. Unlike the first two approaches, sense-and-adjust is dynamic, constantly and consistently smoothing out volatility in areas of business subject to swift and dramatic change, such as research and development or frontline operations like manufacturing and logistics."
