Marketing Metrics: Understanding Market Share and Related Metrics

May 26, 2006

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Probing the dynamics behind market share, this chapter explores measures of awareness, attitude, and usage––major factors in the decision-making process by which customers select one brand over another. It discusses customer satisfaction with products and dealers, the quantification of which is growing in importance among marketing professionals. Finally, it explores metrics measuring the depth of consumer preference and satisfaction, including customers’ willingness to search if a brand is unavailable and their disposition to recommend that brand to others. Increasingly, marketers rely on these as leading indicators of future changes in share.

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Introduction

"As Wal-Mart aggressively rolls out more stores, it continues to capture an increasing share of wallet. Three out of five consumers shopped for gifts at Wal-Mart this past holiday season. U.S. households now buy, on average, 22% of their groceries at Wal-Mart. A quarter of all shoppers indicate that they are spending more of their clothing budget at Wal-Mart now compared with a year ago. These ShopperScape findings lend credence to Retail Forward’s premise that Wal-Mart will continue to push the boundaries of what consumers will allow it to be."¹

At first glance, market share appears to involve a relatively simple calculation: "us/ (us + them)." But this raises a host of questions. Who, for example, are "they?" That is, how broadly do we define our competitive universe? Which units are used? Where in the value chain do we capture our information? What time frame will maximize our signal-to-noise ratio? In a metric as important as market share, and in one as closely monitored for changes and trends, the answers to such questions are crucial. In this chapter, we will address them and also introduce key components of market share, including penetration share, heavy usage index, and share of requirements.

Probing the dynamics behind market share, we’ll explore measures of awareness, attitude, and usage––major factors in the decision-making process by which customers select one brand over another. We’ll discuss customer satisfaction with products and dealers, the quantification of which is growing in importance among marketing professionals. Finally, we’ll consider metrics measuring the depth of consumer preference and satisfaction, including customers’ willingness to search if a brand is unavailable and their disposition to recommend that brand to others. Increasingly, marketers rely on these as leading indicators of future changes in share.

	Metric	Construction	Considerations	Purpose
2.1	Revenue Market Share	Sales revenue as a percentage of market sales revenue.	Scope of market definition. Channel level analyzed. Before/ after discounts. Time period covered.	Measure of competitiveness.
2.1	Unit Market Share	Unit sales as a percentage of market unit sales.	Scope of market definition. Channel level analyzed. Time period covered.	Measure of competitiveness.
2.2	Relative Market Share	Brand market share divided by largest competitor’s market share.	Can use either unit or revenue shares.	Assesses comparative market strength.
2.3	Brand Development Index	Brand sales in a specified segment, compared with sales of that brand in the market as a whole.	Can use either unit or revenue sales.	Regional or segment differences in brand purchases and consumption.
2.3	Category Development Index	Category sales in a specified segment, compared with sales of that category in the market as a whole.	Can use either unit or revenue sales.	Regional or segment differences in category purchases and consumption.
2.4 2.5 2.6	Decomposition of Market Share	Penetration Share * Share of Requirements * Heavy Usage Index.	Can be based on unit or revenue shares. Time period covered.	Calculation of market share. Competitive analysis. Historical trends analysis. Formulation of marketing objectives.
2.4	Market Penetration	Purchasers of a product category as a percentage of total population.	Based on population. Therefore, unit/revenue consideration not relevant.	Measures category acceptance by a defined population. Useful in tracking acceptance of new product categories.
2.4	Brand Penetration	Purchasers of a brand as a percentage of total population.	Based on population. Therefore, unit/revenue consideration not relevant.	Measures brand acceptance by a defined population.
2.4	Penetration Share	Brand penetration as a percentage of market penetration.	A component of the market share formula.	Comparative acceptance of brand within category.
2.5	Share of Requirements	Brand purchases as a percentage of total category purchases by buyers of that brand.	Can use either unit or revenue shares. May rise even as sales decline, leaving only most loyal customers.	Level of commitment to a brand by its existing customers.
2.6	Heavy Usage Index	Category purchases by customers of a brand, compared with purchases in that category by average customers in the category.	Can use either unit or revenue sales.	Measures relative usage of a category by customers for a specific brand.
2.7	Hierarchy of Effects	Awareness; attitudes, beliefs; importance; intentions to try; buy; trial, repeat.	Strict sequence is often violated and can be reversed.	Set marketing and advertising objectives. Understand progress in stages of customer decision process.
2.7	Awareness	Percentage of total population that is aware of a brand.	Is this prompted or unprompted awareness?	Consideration of who has heard of the brand.
2.7	Top of Mind	First brand to consider.	May be subject to most recent advertising or experience.	Saliency of brand.
2.7	Ad Awareness	Percentage of total population that is aware of a brand’s advertising.	May vary by schedule, reach, and frequency of advertising.	One measure of advertising effects. May indicate "stopping power" of ads.
2.7	Knowledge	Percentage of population with knowledge of product, recollection of its advertising.	Not a formal metric. Is this prompted or unprompted knowledge?	Extent of familiarity with product beyond name recognition.
2.7	Beliefs	Customers/consumers view of product, generally captured via survey responses, often through ratings on a scale.	Customers/consumers may hold beliefs with varying degrees of conviction.	Perception of brand by attribute.
2.7	Purchase Intentions	Probability of intention to purchase.	To estimate probability of purchase, aggregate and analyze ratings of stated intentions (for example, top two boxes).	Measures pre-shopping disposition to purchase.
2.7	Purchase Habits	Frequency of purchase. Quantity typically purchased.	May vary widely among shopping trips.	Helps identify heavy users.
2.7	Loyalty	Measures include share of requirements, willingness to pay premium, willingness to search.	"Loyalty" itself is not a formal metric, but specific metrics measure aspects of this dynamic. New product entries may alter loyalty levels.	Indication of base future revenue stream.
2.7	Likeability	Generally measured via ratings across a number of scales.	Often believed to correlate with persuasion.	Shows overall preference prior to shopping.
2.8	Willingness to Recommend	Generally measured via ratings across a 1–5 scale.	Nonlinear in impact.	Shows strength of loyalty, potential impact on others.
2.8	Customer Satisfaction	Generally measured on a 1–5 scale, in which customers declare their satisfaction with brand in general or specific attributes.	Subject to response bias. Captures views of current customers, not lost customers. Satisfaction is a function of expectations.	Indicates likelihood of repurchase. Reports of dissatisfaction show aspects that require improvement to enhance loyalty.
2.9	Willingness to Search	Percentage of customers willing to delay purchases, change stores, or reduce quantities to avoid switching brands.	Hard to capture.	Indicates importance of distribution coverage.

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