The Myth of Market Share: Why Market Share Is the Fool's Gold of Business (Crown Business Briefings) by Richard Miniter

Author:Richard Miniter [Miniter, Richard]
Language: eng
Format: mobi
Publisher: Crown Publishing Group
Published: 2002-10-14T14:00:00+00:00

LOWERING PRICES

Cutting margins to boost volume invites competitors to match the new low price. If the competition’s cost structure is the same or lower, then a pointless price war follows. This periodically grips the airline industry and the beverage (both beer and soft drinks) industry, and it is what automakers do repeatedly. “It is easy to sell minivans,” one analyst told me grimly, “when you put $2,000 in the backseat of each one.”

But there is a better way. Consider the retail gasoline industry. The conventional wisdom is simple and simply wrong: Since all fuel is the same, the only way to compete is on price. This should be an area that vindicates the market-share maniacs, but it isn’t. After months of research, Mobil identified the needs of high-involvement buyers: fast, friendly service, brightly lit stations, and clean toilets. Mobil decided to put the service back in service stations—and charge a bit more for its fuel.

The result? While 1997 sales fell 2 percent for the industry as a whole, Mobil enjoyed a 3 percent increase in sales. That is a big boost in a highly competitive business. Mobil’s retail gasoline sales revenue remained steady in 1998, as total industry sales revenue—hammered by discounting—declined another 3 percent. (After the Exxon-Mobil merger, this successful strategy was put on hold. As a result, the merged company ceased to be a profit leader in its industry.)

While there are some good reasons to lower prices (such as sweeping technological change that lowers production costs across the industry), marketers need to learn from Mobil. Firms should give customers a definite reason to buy a product, beyond price. Once they have identified what sets their product or service apart, they must clearly communicate this benefit to customers through an integrated marketing, advertising, and sales plan. Here is a hint: Target the high-involvement buyers.

When you discount, you’re telling high-involvement buyers that they’re wrong to care so much about your brand. You should hope that your competitors keep discounting their products. Let them sell commodities—while you build a brand. “Now is the time to remind your customers why your brand is worth more. Make communicating the importance of your brand a key part of your marketing strategy,” says Robert Shulman, co-founder of Copernicus. (He is now chairman of Markitecture, a Norwalk, Connecticut–based marketing consulting outfit.) “Let your competitors cut their prices to build share. They know what their products are really worth.”

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.