Five Actions to Increasing Market Share: How Consultants Can Help
What is market share? Why is it important?
In the highly competitive world of business, companies are always trying to expand their influence. In other words, they are fight to gain market share. Market share is a measure of the consumers’ preference for a particular company’s product over other similar products offered by the competition. Higher the market, higher is the sales; the company expends less energy to sell more. When a company fortifies its share, it raises a strong ‘barrier to entry’ for other potential competitors. Often, companies engage retail consultants to help them identify critical measures to acquire and maintain market share.
Typical actions companies take to increase market share
1. Innovation: One of the ways to get ahead of the pack is by innovating. Through product innovation, or by introducing a new technology, a company can give itself a shot in the arm. A completely new product can open up a completely new market for the company. For example, when 3M launched post-its, it created a new category. The company did this again when they launched scotch-brite[i]. Companies can expand or protect market share by enhancing product quality. Software companies launch upgrades and new features to ensure that customers stay loyal and find no reason to switch to a competitor product[ii]. Moreover, happy customers will bring in more customers. Retail business consultants can guide their clients to plan for innovation. . However, an evergreen innovation strategy requires considerable investment in new product development team, time, and other resources.
2. Price reduction: Another way that companies seize market share is by lowering prices. This is a common strategy prescribed by retail consultants. One way to do this effectively is by undertaking value engineering/process engineering that reduces the cost of the product without affecting quality[iii]. The reduced cost can then be passed on to the customers. For example, the price of LED lights have been steadily coming down since they were first introduced. This is why prices of many products around us have stayed the same in spite of inflation and other factors.
Another strategy can be a targeted reduction of price without any rise in costs. Some companies undercut each other with such a strategy to win over the price-conscious customer and thereby grab market share. The assumption is that once customers have experienced a particular product, most will stay loyal to the brand. For example, many online retailers offer huge rebates to break customers’ reluctance to shop online. This, however, is not sustainable. This approach requires deep pockets and can prove a heavy drain on company resources. Moreover, the assumption that the customers will stay and not migrate to the next company that gives a better offer, may not hold good. As more and more companies engage in such pricing tactics, price wars can ensue. This can be detrimental to the industry as a whole. For example, the price wars between telecom companies in India[iv] is considered culpable for the bankruptcy of few of the players.
3. Advertising: Advertising is yet another way to spread the good word. Companies with
the help of agencies, retail consultancies, etc, can craft effective integrated marketing communications that target customers through different media — from triggering interest television ads to prompting purchase through POS advertising at retail points. The company Amul is well known for its acumen for leveraging advertising.[v]
4. Mergers and Acquisitions: A more aggressive way to scoop up customers is to acquire
a whole company, often a competitor. Pidilite, for example, is a company known to buy out companies in a bid to increase its portfolio[vi] and protect its market leadership. Retail business consultants are known to have played crucial roles in enabling a smooth transition and amalgamation of distribution channels after the completion of such mergers and acquisitions.
5. Ensuring availability of products at every retail store (if no product on shelf, there can be no sale) : While all the above steps, when used appropriately, are useful for
acquiring market share, the most important and necessary action is to first ensure product availability at every store which a potential customer may likely enter. Most companies ignore or take for granted this most crucial aspect. Many retail consultants miss out on advising their clients about this step as well. Money may be lavished on some or all of the other actions even as market reach languishes at 20–30 %. A closer examination may also reveal that each retailer the company manages to reach is has on the shelves as little as 20–30% of the relevant range of the company’s products.. In these circumstances, all the other measures the company takes will mostly be futile. There is a limit to the customers who will actively seek out an innovative or well-advertised product by going from store to store. Buyers visiting a retail counter, on not finding the product they desired, could pick up a rival brand’s product. On sampling the same, they could easily switch loyalty without second thought. No company can afford to lose its hard-earned customers in this manner. Without availability of your product, the price advantage you may have painstakingly created for your product will likely be lost on the customers since the product not even part of their ‘consideration set’ at the store.
Retails consultants who are good recognise this and would advise that ideally, the first step, before all the others mentioned here, should be to ensure that the product is available in all the stores. This is usually a time-consuming exercise; some advertising and other actions to create interest in the product will be required simultaneously. However, product availability has to stay a couple of steps ahead of product promotion. The company’s presence at retail counters has to improve faster than its mind share does. A company’s market share can only go up if availability of product keeps pace with demand.
For this, the distribution channel of the company should be responsive to consumer demand at all retail points. A retail business consultant[vii] who is well versed with implementing “pull” based replenishment systems would be most suitable for this assignment. Retail business consultants who enable “pull” supply chains are systems thinkers. With their help, companies design seamless distribution and retail networks; undertake the oft-times tough transition from existing forecast-based inventory movement systems to pull-based systems. Forecast-based or push-based systems are usually never aligned with real customer offtake and can create a sludge of inventory in the channel[viii]. Retail consultants can help companies work closely with all the channel partners and ensure a steady supply of the right product at the right time to the right retail point. This will prevent stock outs, and at the same time ensure that the inventory levels in the channel does not become a drain for the companies or their partners. Bajaj Electricals[ix] is an example of a company that benefited significantly from this strategy.
With retail consultants by their side, companies gain confidence to strive for higher goals, reach for yet another slice of the market pie.
References:
https://thestrategystory.com/2021/05/27/3m-innovation-strategy/
https://hbr.org/2011/04/why-most-product-launches-fail
https://cdn.ymaws.com/www.value-eng.org/resource/collection/AA7B1D56-593E-439C-8594-A4056B35BB70/1968_September.pdf
https://www.economist.com/business/2019/12/14/a-price-war-has-undermined-indias-big-telecoms-companies
https://thestrategystory.com/2021/05/14/marketing-branding-promotion-strategy-amul/
https://economictimes.indiatimes.com/markets/stocks/news/pidilite-to-acquire-huntsman-groups-indian-subsidiary-for-rs-2100-crore/articleshow/78925397.cms
https://www.vectorconsulting.in/research-publications/consumer-industry-insights/managing-distribution-chain-is-there-a-better-way-than-gazing-the-crystal-ball/
https://www.youtube.com/watch?v=pIOCZ13vfeI&t=87s