Research Tips (4): Market shares and rankings

Market share for a company or a brand is usually expressed as a percentage of the total market. Or, at least, it should be, but it's often the case that shares can be massaged upwards by taking a narrow view of the "total market".

Let's say we read in a press release that "Brand X has a dominant 60% market share". We need to ask a few questions:

1. Is the share of volume or value? (sometimes, "unit" or "Sterling" share respectively). If Brand X is an economy brand it could have a dominant position in units but the Sterling leaders could be those selling fewer units at a much higher price.


2. Share of which distribution channel? For many products, sales through multiple retailers are exhaustively researched (by retail audit systems) but what about independent shops, mail order, outdoor markets, and of course, e-commerce?


3. Is own label share included in total sales? Manufacturers understandably like to measure their brands' performances against other brands, but the picture becomes distorted when the stores' own label accounts for much of the market.

So, Brand X could have 60% of the total market by value. Or it could have 60% of branded unit sales (excluding own label) through multiple grocers, and its overall market value share could fall to 30% or less if the comprehensive market, by value through all outlets, was measured.

How important is brand share? How much does it matter? For manufacturers, gaining and keeping a listing in multiple retailers depends on proving that their brand is in demand and ahead of its competitors. Changes in brand share, up or down, are also a vital indicator of the strength of a brand, including its marketing and pricing strategies.

Outside the conventional retail channels, brand shares are usually harder to calculate, and that includes many leisure markets. Ascribing market share to Alton Towers or JD Wetherspoon would depend on agreeing value/volume totals for the theme parks or pub markets - not an easy task. Where statistical shares of a total are impossible to come by, researchers may have to make do with rankings based on objective data (e.g. turnover, from financial reports). If that fails, the subjective opinion of companies in the trade in question, or suppliers to that trade, may be the last resort. B2B market research often includes questions to responding companies about major competitors.

Finally, there are occasions when market shares can be massaged down, not up! This is usually done to satisfy government regulators whose aim is to prevent monopolies developing. As more industries consolidate around a handful of major players, this temptation to under-estimate market shares may become more common.