The Market Share Model
How to improve Revenue Generation and Market Share?
The market share model is a calculation with three elements as follows:
PRODUCT FIT X MARKET PRESENCE X CLOSE RATE = MARKET SHARE
Since this a calculation, improving any one of these factors results in an increase in market share. Improve all three and ……………..
There are lots of things that influence these factors and can be improved.
Product Fit is how often (what percentage of the time) does your product meet the customer needs at its price point? That is to say how many potential customers are there that have specific requirements that you product can meet?
The key to this is market segmentation, and matching your product to specific needs and adjusting your product and marketing message accordingly. You can also judge the size of the total market and how big the market is for your specific product in each of the segments. Clearly you have to be able to segment your market into groups with different needs, know what their needs are and be able to match them with product features.
For example, let’s take your existing User Base as a potential total market - this not a market segment - i.e. not everyone in your user base has the same needs or a need that is matched by PRODUCTS IN YOUR PORTFOLIO. Your User Base can be split into different segments of different sizes and with different needs – e.g. Architects, Draughtsman, Quantity Surveyors, Estimators – (and some may be in different industries e.g. House building, Construction, Engineering, Oil). You need to know how many customers in each segment your product fits - within each of these segments there may be sub-segments with different needs.
You can improve PRODUCT FIT through better product management, product marketing and by improving your market segmentation, understanding different customer needs, and improving products (differentiating) to meet the needs of more customers in your target markets, segments and sub-segments – e.g. by adding features, functions and added value services.
Market Presence is what percentage of the time when they are going to make a purchase decision do those in your target segment (product fit) actually consider your product. Again lots of things influence Market Presence - Brand recognition and reputation, marketing communications (quantity and quality), how often they see your company and product in marketing communications, sales calls, personal relationships, advertising, search engine optimisation, quality of competition, number of alternatives, potential risk, etc. And often a combination of all of these.
I have known sales people who called on a potential customer on a regular basis but when the customer decided to purchase a product they were not asked to quote – so quantity of communication / contact (alone) is not necessarily enough. So you can see even if you perfectly fit the needs of 50% of your target segment the number of opportunities could be greatly reduced by poor (low percentage of) Market Presence.
To improve Market Presence you have to deliver good targeted marketing communications across multiple channels and increase customer awareness of your ability to meet their needs and the value of your proposition. Good sales relationships are a key factor.
Let’s assume in some cases you targeted some companies whose needs you fit, and they saw your marketing communications and are aware of your capabilities, and decide to consider your product when they are going to make a purchase decision. What percentage of these will you win (Close Rate)? Close Rate is influenced by a number of things – sales skills, total pricing, quality of proposals, total product offering, added value services, quality of competition, brand recognition and reputation, level of risk, financial arrangements, cost of ownership, etc. If you don’t satisfy buying criteria you will have a low win rate (percentage).
Improving market share is improving your sales performance and generating revenue at a greater rate than competitors, and achieving growth in revenue that is greater than the growth in the market; and similarly increasing or maintaining your share of market value whilst the market and competitors' sales values are shrinking.
Product Fit, Market Presence and Close Rate are all influenced by product management, product marketing, sales and marketing programmes, market research and positioning, value propositions, brand recognition and reputation, etc.
A good marketing strategy will work on all the criteria that influence the Market Share Model – investing in your product portfolio to create a good Product Fit, sales and marketing programmes to improve awareness and Market Presence, and selling skills to deliver a superior Close Rate.
For more information on improving Revenue Generation and the Market Share Model contact:
Roy O’Neil on 07958614398, email Roy@3r-creative-solutions.co.uk
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