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.

Research Tips (3): Market size sources

Market size is both the starting point and the Holy Grail for assessing markets. Usually expressed in value of spending (sometimes in volume of goods), the market size description should contain something like this, at the bare minimum:

"The market for Product X was worth £150m at retail prices in 2006, having grown by 5% over 2005."

This statement is usually accompanied by a statistical table showing sales over the most recent 5-6 years. Usually 5-6 years, simply because that fits across the width of an A4 sheet! Also because a five-year period will give a guide to growth trends and will often include a boom or bust phase.

This may seem like a very basic analysis but many things stem from here:

• How much is £150m, relative to other markets, and the overall economy?

• Is 5% a reasonable rate of growth in the current economic climate, assuming it includes inflation (i.e. at current prices)?

• If we know Company A's turnover, we can give it a market share (by converting manufacturer or wholesaler prices into retail prices)

• From the total market size, we can then start the all-important segmentation analysis which will tell us where the gaps are in the market and which products are selling well

• The 5-6 year analysis also gives us a start on calculating the all-important future of the market. Without a projected trend of some sort, no rational business decisions can be taken.

So what are the sources for these market size figures? There are several:

• For many consumer products, the most widely quoted come from retail audits which should, in principle, give accurate data of actual sales. The problem is that this works fine for branded, fast-moving consumer goods sold through store chains - the type of market where market research originated - but audit-quality data are rare in services, leisure industries, B2B markets and industrial sectors. Audit data is also expensive and usually very confidential to the large companies that fund its collection. A further problem may be that the audit does not adequately cover all distribution channels - a growing problem in the e-commerce era.

• Government statistics include expenditure series which, with some qualification, can be used as commercial market sizes. Consumer Trends, for example, gives variable coverage of many consumer markets (products and services, often based on the official Expenditure & Food Survey of households). The Product Sales and Trade series has aggregate sales for larger companies in an industry and includes imports and exports.

• "Apparent consumption" is a calculation of national market size using domestic company sales ("production", or "output"), less exports, plus imports. This is rarely a precise method (often interfered with by re-exporting) but is useful for measuring an industry's export ratio (exports % output) and import penetration (imports % consumption). A domestic market might be tough to get into (high import penetration) but some segments of it might show potential for developing exports.

• The term "Trade estimates" is often seen as a source for market sizes. If the "traders" in question are not simply quoting retail audits or other data sources, it is usually a matter of major players in the market knowing (or estimating) their own market shares, thus letting them gross up their turnovers (and those of competitors) to a total market size.

• The grossing up of major companies' sales into a market size is also a method used for another source, the trade association survey of members. Association data based on member surveys varies from the skimpy or non-existent up to detailed documentation produced by associations like the Cinema Advertising Association or the Society of Motor Manufacturers & Trades (see also Research Tip 2: Trade associations ).

• Finally, market research in its narrow definition of field research to obtain data on consumer or B2B activities is another source for estimating markets. If we know how many consumers/businesses buy something, how often in the year, and the average prices in the market, we can come up with a market size, although this method is a long way from the accuracy of the retail audit.

Where possible, market sizes emanating from one of these sources should be checked against other data sources - does the given market size (and growth rate) stack up against major players' turnovers, import statistics, government retail statistics, statements from trade associations and so on.

Research Tips (2): Trade Associations

After finding out about market research reports that have been published on a topic (see Research Tip), an industry's trade associations (TA) are a first port of call. These associations, sometimes called federations, bring together companies rather than individual professional members (usually, societies or institutes). Lobbying government on legislation or taxation is a primary aim, but many TA also gather and disseminate product information and statistics from their members - a reliable and useful source for leisure research.

TA websites should include important industry news, publications, events and lists of members, in better cases including market reviews derived either from government statistics or, better still, from surveys of members. (Detailed stats. are often confidential to members, although reasonably priced yearbooks may be published). Some good examples in the leisure sphere are:

• British Hospitality Association, covering mainly hotels and restaurants. Publishes Trends & Statistics yearly, free on the website.

• British Beer & Pub Association, whose comprehensive Statistical Handbook can be ordered for £47.50 (2006 edition). Also some free brewing and pubs data on the website.

• Cinema Advertising Association represents the two cinema advertising contractors, Carlton Screen and Pearl & Dean, whose websites both publish CAA data.

• British Video Association and British Phonographic Industry both publish market data in considerable depth on the recorded media industries

• The sports and play sectors reorganised in 2005/2006 into a Federation of Sports and Play Associations, bringing together individual associations (eg for golf, angling) under a new umbrella body. FSPA has a separate sportsdata.co.uk website for ordering reports, although reports on the more esoteric topics are research and published only sporadically. (As a general rule, it is worth checking that the smaller TA websites are being kept up to date.)

For the researcher, TA provide "insider" insight into the workings of an industry and, with any luck, free or reasonably priced data on the market. They are often run by enthusiasts for their industries whose PR role means they are usually willing to interview. It is always wise, however, to ask a few questions of the association:

- how representative is it of the whole industry (large and smaller companies)?
- has the website, and its information, been kept up to date?
- given the protective PR function of the TA, is the information skewed in any way?

A major portal to finding a TA is the Trade Association Forum, administered by the CBI (Confederation of British Industry) and partly government-funded. The TAF Directory is a comprehensive online database of TA contacts (www.taforum.org/searchgroup.pl?n=500&directory)

Research Tips (1): Published market research

The first thing to do in researching a leisure market is to find out if the work's already been done for you!

Published market research (MR) reports from UK companies like Key Note or Mintel will provide, at the bare minimum:

• Market sizes, growth trends, market segmentation

• Consumer statistics: penetration, profiles, attitudes (for original research)

• Supplier analysis: major companies, brands shares, distribution channels

• Strategic discussion and forecasts (including economic context)

Expect to pay at least £400 for a detailed report (eg Key Note's Betting & Gaming 2006 £420) although Snapdata has filled a gap with more basic reports, UK and international (eg Brazil Beer 2006, £150).

Any Web search for published MR will immediately highlight UK publishers. This isn't a "push" by the search engines, just a recognition of how highly developed MR publishing has been in the UK since the 1970s, particularly in a European context. Major publishers like Euromonitor and Datamonitor are leading international sources of business information.

All these well-established publishers pre-date the MR report portals like Marketresearch.com, where a Quick Search on the home page for "UK Beer" comes up with a dozen reports, mainly from the publishers mentioned above but also some drinks specialists (eg Canadean). Apart from the cost of these reports, the main problem is that you are lucky to find a report published within the last twelve months, so some updating (sales, mergers etc) is almost bound to be necessary.

Karen Blakeman's site (www.rba.co.uk/sources/mr.htm) is an excellent starting point for finding published reports.