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3.3.2 Understanding Market Share: Assessing Demand and Analyzing Market Patterns

Overview

Market size and market share analysis are essential for developing effective segmentation, targeting, and positioning strategies. These analyses involve understanding potential, available, and target markets, along with determining market demand, market forecast, and market share.

Key Concepts

1. Market Demand

  • Formula:
    Market Demand = Number of buyers × Quantity purchased by an average buyer × Average price.
  • Types:
  • Primary Demand: Total demand for a product category (e.g., all soaps).
  • Secondary Demand: Demand for a specific brand within that category (e.g., Lux or Lifebuoy).

2. Market Size Analysis

(a) Potential Market

  • Definition: All consumers who show interest in a product.
  • Includes consumers regardless of income or access to the product.

(b) Available Market

  • Definition: Subset of the potential market comprising consumers who:
  • Have interest.
  • Possess income.
  • Have access to the market (e.g., product availability via distribution).

(c) Target Market

  • Definition: Subset of the available market chosen based on the company's resources and marketing activities.
  • Example:
  • A company focusing only on online sales might target younger, tech-savvy customers (e.g., 15–25 age group).
  • A company relying on kirana stores might target older demographics (e.g., 50–60 age group).

3. Market Expenditure and Demand Relationship

  • Market Minimum:
  • Demand level with no marketing expenditure.
  • Market Potential:
  • Maximum achievable demand even with unlimited expenditure.
  • Market Forecast:
  • Expected demand within the range of market minimum and market potential, determined by expenditure.

Example: Market Sizing for Women's Razor Blades (US)

Step 1: Estimate Total Buyers

  1. US Population: 305 million.
  2. Women Population: 51% of 305 million = 156 million.
  3. Women of Shaving Age (≥14 years): 80% of 156 million = 125 million.
  4. Exclude Non-Shaving Women: 20% reduction = 100 million.
  5. Exclude Users of Other Methods (e.g., waxing): 20% reduction = 80 million.
  6. Potential Market: 80 million.

Step 2: Annual Quantity Purchased

  1. Segment Customers by Usage:
  2. Heavy users (15%): 12 million, purchasing 12 blades/year.
  3. Moderate users (70%): 56 million, purchasing 7 blades/year.
  4. Light users (15%): 12 million, purchasing 3 blades/year.
  5. Total Blade Usage:
  6. Heavy users: 12 million × 12 blades = 144 million blades.
  7. Moderate users: 56 million × 7 blades = 392 million blades.
  8. Light users: 12 million × 3 blades = 36 million blades.
  9. Total Market Volume: 572 million blades/year.

Step 3: Market Value

  1. Per Blade Cost: $8.99.
  2. Segment Value:
  3. Heavy users: 144 million blades × $8.99 = $1,294.56 million.
  4. Moderate users: 392 million blades × $8.99 = $3,524.08 million.
  5. Light users: 36 million blades × $8.99 = $324.64 million.
  6. Total Market Value: \(5,143.28 million (~\)5.14 billion).

Strategies for Market Growth

1. Expand Market Size

  • Increase Usage:
  • Convince non-users (e.g., women who don’t shave) of the benefits of shaving.
  • Promote shaving as a hygienic and convenient option.
  • Shift Preferences:
  • Encourage users of alternative methods (e.g., waxing) to switch to razors.

2. Increase Usage Frequency

  • Convert:
  • Light users to moderate users.
  • Moderate users to heavy users.
  • Example:
  • Use promotions, discounts, or convenience-focused messaging to encourage more frequent purchases.

Market Share Analysis

Formula for Market Share:

Market Share = (Brand Sales / Total Market Sales) × 100.

Steps:

  1. Calculate Primary Demand:
  2. Total market demand for the product category (e.g., 572 million blades/year for women’s razors).
  3. Calculate Secondary Demand:
  4. Brand-specific demand (e.g., sales of Brand X razors).
  5. Compare brand-specific demand to total market demand to determine market share.
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