Does Market Share Matter?

Not always. A simple example will illustrate:

Suppose I open a small restaurant in my local community of 20,000. I estimate that of those 20,000, about 3000 represent my “target group” or market. After two years in business, I find that I have served about 10 percent of that target market. Is 10 percent significant market share? No. Do I care? It depends. It depends on:

1) Whether I have the capacity to serve additional share. I may not. In fact, I may be at the limit of my capacity and not willing to invest more in building additional capacity. So, 10 percent market share may be just fine.

2) Whether there are other metrics that may be equally – or potentially more – important to me. Metrics like: retention, loyalty, repeat business, etc. If I can capture 100 percent “share of wallet” from 50 percent of my 300 loyal patrons (meaning they are not going anyplace else to eat), for instance, I might be doing just fine.

3) And, related to #2, whether I legitimately feel that my product/service is a “total replacement” for others or simply an alternative. In this example, for instance, I know that diners are likely to choose other options from time to time. That’s okay. As long as I’m meeting my goals – whatever they are – market share may simply not matter.

In short, market share may not matter.

The point is that too often businesses – even very large businesses – chase after a metric that they’ve heard about or that other businesses follow, but that may not be appropriate for them. If I’m focused on a measure like market share, for instance, that focus may make me oblivious to other – potentially more important – metrics.

Does market share matter? It depends. What it depends on will be unique to every business and that business’ specific, and often unique, strategy.

Make sure that the measures you’re using to gauge your business success are valid, for you. Don’t waste time and resources chasing after measures that may not matter.

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