3 reasons why you shouldn’t use market share to measure performance

Performance Measurement

Many businesses often get too caught up in measuring their performance using their market share. While you’d think that this would be a reasonable method of measuring your success since it shows how well you’re doing in relation to your competitors, it can often skew your perception of what is actually going on.

Why market share data shouldn’t always be used

Using market share alone to measure your performance is a risky ploy. There are a number of reasons why the sole use of market share to measure performance isn’t necessarily a great metric. We looked at a few below.

1) Uses historical data: Market share data is often taken and assessed well before it is published. This time period can stretch as far as 12 months, meaning the data you’re looking at and using to measure your success won’t be correlating with your real time performance. This means that you could be under the illusion that you’re doing well when in actual fact your market share could be slipping. Another problem with this is that it makes it very difficult to understand what factors have caused the increase/decrease in market share since the data is old. Do you remember how you were doing things a years ago and which of those process could have contributed to an increase in your market share? Or do you remember which external factors could have caused your market share to slip from months ago? In some cases you might be able to piece things together however it does make understanding the cause for the growth/decline in market share difficult to track.

2) All results are relative to your competition: Market share data is based completely on your competitiveness within your market, and so results are always relative to your competitors. You might be thinking that this is fine given the fact that if your market share is increasing then surely you’re in a better position, which technically yes is true in a competitive sense however it doesn’t provide a true reflection of your business. For example, your market share could increase as a result of a competitor failing as opposed to you actually doing anything better. So while in reality your business might be stagnant in terms of its churn rate and customer conversion rate, market share stats would make it appear that in actual fact you’re improving.

3) Inaccuracies in data: The manner in which market share is measured can also cause it to serve different results. For example, defining which businesses are classed as the competition can be difficult in some industries which in turn won’t provide concrete data. In addition to this, some businesses may operate across a range of different industries which can lead to turnover for a particular industry being hidden by their overall turnover figures. On top of the difficulties of gathering accurate data, there’s always the chance of errors being made or the source of data from competitors being inaccurate, once more leading to market share data which fails to provide a true reflection of the current competitive state of the sector.

So, instead of becoming too heavily reliant on your market share we’d recommend you look at present figures which can be tracked on a monthly or even weekly basis instead. Data that should be assessed should include things such as your number of new customers, your churn rate, average transactional value and your sales and profit. These figures will give a far better idea of exactly how you’re performing at the current moment and where things need to be improved. You should still keep an occasional eye on your market share in order to give you an idea of how your performing in relation to your competition but more importantly you should ensure that you’re keeping a closer eye on and improving month to month results for those metrics mentioned above. Keep doing this and alongside the improved performance of your business you’ll also most likely see an increase in your market share..

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Ian is the founder of Opportunity Marketing marketing, with over 18 years of experience in successfully setting up marketing departments, creating marketing strategies and implementing these strategies across a wide number of SME companies in both the B2B and B2C sectors through a variety of channels.