Monday, July 26, 2010

A critical metric to assess position vs. competition is market share. This is a very insightful article which highlights different approaches to gaining share without necessarily falling into a margin death spiral.....

"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."

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