Gaining your unfair share

It is widely accepted that capturing a more dominant share of a market leads to enjoying higher profits over those you compete with. Both economic theory and empirical evidence confirm that as sales volumes increase so do profits, as economies of scale come into play. With gains to be made across purchasing, production, warehousing, staffing, logistics, marketing and more.

All accelerated by a business now able to invest in better equipment and automation that lowers unit costs. One that is increasingly attractive to larger, more lucrative customer accounts wanting fuller services and more competitive pricing. Supported by highly skilled and professional individuals wishing to work for a more market dominant company, able to offer highly attractive salaries and a better working environment.

However, high market share can also bring a few headaches as those now dominant companies are even more tempting targets for actual and potential competitors that may have previously ignored you until you stuck you head above the parapet. Forcing many dominant companies to make decisions and manage their operations with much more care, and more mindful of risks that were not present before.

So, when it comes to market share many believe that the goal should not be to gain your unfair share, but rather to gain optimum market share. A point at which there is a balance between market share, profitability and risk. The point that if you venture beyond there is insufficient additional profit and quantifiable benefits to compensate for the added risks you would expose your business to. Gaining your unfair share is not always the best venture.

The majority of companies that do analyse their market position generally conclude that they are operating below optimum share. Not fully exploiting what they already have and potential economies of scale that currently exist, reflecting opportunity for many reading this article. A few identify that they have in-fact overextended themselves and now understand, maybe for the first time, why profit has been so elusive and the need to actually reduce market share often by simply eliminating marginal customers to bring things back into balance may be a better way forward.

Another aspect of this is developing share of customer. Whilst they do buy from you few customers give you all their business. So, alongside attracting new profitable customers to grow market share the focus should also be on ensuring each buys from you to the exclusion of your competitors. A guaranteed way to rapidly increase your profitability with increased customer loyalty, recommendations and referrals as a bonus.

So don’t simply chase market share, being the biggest is not always the best. Focus on your share, the optimum level at which your business can profit, reduce risk, serve your customers well and profit from their loyalty and support.