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Subject:  Re: Gaining market share? Date:  3/16/2007  11:13 AM
Author:  RickybTMF Number:  1820 of 2244

I'm a marketing exec, so let me take a simple stab at answering the question.

Markets are simply where buyers/customers and sellers/suppliers come together. Markets exists for apples, computer chips, and potato chips: anything that is bought and sold. Suppliers to the "Market" compete for a % of customer orders. This % is called "market share."

If a company is "gaining market share" they are increasing their % ownership of the market.

EXTRA CREDIT: When Gaining Market Share is Bad
Please BE CAREFUL when evaluating "gains in market share." I mean, that sure sounds like a good thing, right? My company is having an increase in orders of widgets! Customers want more, we make more, we SELL more! Surely, that's a GOOD thing, right?

Maybe not. I have a sure-fire way to make customers BUY MORE. Cut the price. Think about your last trip to the grocery. You see Coke is on sale. Coke was not on your grocery list; you have plenty of Coke at home. But, dang! 3 twelve-packs for $5?! So you buy Coke.

Two bad things about this scenario for the supplier (e.g., Coke). First, they cut their price. This is not always a bad thing. IF the volume increases sufficiently, Coke makes out great in the deal. On the other hand, if the volume lags projections, the company loses money on the price cut. THEY GAIN MARKET SHARE, BUT LOSE OUT ON THE DEAL. Think about that a while.

Second, price cuts can lead to customers doing something called a "forward buy." In our grocery store example, you did this when you bought Coke that you did not need. You would now have next month's Coke purchase sitting in your pantry at home. Now, you will not buy Coke next month! THEY GAIN MARKET SHARE now, BUT LOSE FUTURE SALES.

Anyway, there are folks (myself included) who make entire careers out of this stuff. Marketing is not about sipping martinis at a 2-hr lunch. Marketing is a quantitative business discipline. And, for those companies where it is not? Those are not businesses worth having in your portfolio.

I hope all this helps! Good luck!!
All the best,

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