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Market-share mania
Does your company suffer from market-share mania? This is an excessive preoccupation with market share. Maybe it’s driven by your suppliers, who are constantly pushing you for volume because they have capacities that cannot idle. Maybe your management team is focused on growing by acquiring new markets. Maybe it’s simply a source of pride to say that you’re the biggest in your marketplace. All of these seem reasonable. But what happens when your preoccupation with market share prevents you from capturing full value from your existing base of business?
Consider a distributor that keeps prices at a lower level out of fear of losing some market share by raising prices. The question that distributor must ask is, how much more value could we extract from our existing customers by raising prices, but we’re unable to extract that value because of excessive concern for market share? How many of your existing customers value your products and services by a factor of 5 percent, 10 percent or even 15 percent, but you’re unable to capture that value because you’re worried about losing a few customers that won’t pay the higher prices?
What if you lost 5 percent of your customers but gained 20 percent on your bottom line? More money for less work. Now that’s something to think about.
Market-share mania
January 28, 2008
Does your company suffer from market-share mania? This is an excessive preoccupation with market share. Maybe it’s driven by your suppliers, who are constantly pushing you for volume because they have capacities that cannot idle. Maybe your management team is focused on growing by acquiring new markets. Maybe it’s simply a source of pride to say that you’re the biggest in your marketplace. All of these seem reasonable. But what happens when your preoccupation with market share prevents you from capturing full value from your existing base of business? Consider a distributor that keeps prices at a lower level out of fear of losing some market share by raising prices. The question that distributor must ask is, how much more value could we extract from our existing customers by raising prices, but we’re unable to extract that value because of excessive concern for market share? How many of your existing customers value your products and services by a factor of 5 percent, 10 percent or even 15 percent, but you’re unable to capture that value because you’re worried about losing a few customers that won’t pay the higher prices?
What if you lost 5 percent of your customers but gained 20 percent on your bottom line? More money for less work. Now that’s something to think about.
Posted by Tom Reilly on January 28, 2008 | Comments (0)
Industries: Sales & Marketing
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