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5 Things to Consider When Evaluating Market Share

Chocolate pie cut into graph-like slices - evaluating market share

By Stacie Hughes

You know what’s great about working with a team of really smart people? You can leverage their years of specialized knowledge. My coworkers are a valuable part of the toolkit I use to do my job. Similarly, I often remind my clients that we are a part of their data toolbox: the members of the TraQline team bring many different approaches and ideas to analyzing or solving data problems our clients may have.

One question we get asked all the time – what’s the best approach to evaluating & calculating Market Share? I decided to take this question to my teammates and their combined years of experience- as they say, ‘Eight brains are better than one.’ As a researcher, I know there are multiple routes I can take when evaluating a client’s market share that will influence my final evaluation.  I want to share some of those solutions and ideas with you so you can leverage these best practices from the leaders driving our business.

If you're missing the tools you need to evaluate your market sahre, talk to one of our reps to see how TraQline can help. Contact us today!

1. Unit Share & Dollar Share Determine your Starting Point

It isn’t uncommon for clients to call us and say, “My share isn’t what I expected, can you help me understand why?” The most common approach from the TraQline team for calculating and evaluating market share is to start with unit and dollar share. Even if you already know this, it’s important to start here to work through the problems and solutions. When we understand a little more about how these two numbers work together, it helps shine a light on how shares are reflected in the market. For example, some clients favor a higher unit share because they have an Every Day Low Price (EDLP) strategy to support a goal to sell more overall—and if your Average Price Paid (APP) is lower, then it is reasonable to expect that you may have a lower dollar share (Unit Market Share x APP = Dollar Share).

What’s in a product? Your specifics matter

Dollar share and unit share are also impacted by the specific product itself – for example, compare two retailers: one selling refrigerators and one selling cleaning supplies. The retailer selling refrigerators has a high-ticket price product, which will drive up the dollar share of that retailer. However, data shows that refrigerators are purchased far less frequently than cleaning supplies. The retailer selling cleaning supplies, on the other hand, has products that are purchased frequently, but at a lower price. Perhaps unsurprisingly, the unit share for the cleaning supplies retailer will be higher than the retailer selling refrigerators. We caution our clients as they compare unit and dollar shares to those of their competitors because of this very issue.

Check your Definition

When evaluating market share overall, it is important to ensure the product definition from TraQline matches the category definition you expect. For example, let’s say a Gas Grill manufacturer runs a total BBQ Grill report, expecting a share number higher than what the report shows. However, the total BBQ Grills report contains all types of grills (e.g. Gas, Charcoal, Pellet and even smokers vs traditional grills). To more accurately reflect the specific market our gas grill manufacturer operates in, they would need to apply a filter to eliminate non-Gas Grill products. They don’t need to compare their performance against Charcoal Grills since that is something they do not manufacture. While this example is a simple one, it is an important way to illustrate how your definition of the category can impact your share.

2. Draw, Close, & Walk rates are your next Stop

Once you have reviewed unit and dollar share, the next step is to investigate the draw and close rates. Draw rate is derived from the number of people who shopped a brand or outlet divided by the total number of people who bought a product in general. Close rate is the percentage of people who ultimately purchased that brand or outlet. Combined together, these two metrics help to define market share (draw x close = market share).

Draw Rate

When researching why a client’s shares have declined, I typically want to understand if there was a drop in the number of customers shopping an outlet or brand (a decline in draw rate). If draw rate is down – fewer shoppers are shopping your brand or outlet, therefore having negative consequences on your overall market share (draw x close = share).  Bolstering your draw rate isn’t always easy – the easiest way is to add stores or increase your distribution. This allows for broader access to a larger population (more stores or products in stores means you’re closer to more people). Other ways to increase your draw rate include increasing advertising, improving the shopping experience (which creates word-of-mouth buzz), better shelf position, or promotional activity – anything that puts your product front and center in the buyers’ mind.

Close Rate

As stated above, a decline in close rate can also negatively impact your market share. Your close rate is the number of people purchasing a product from your store divided by the number of shoppers who shopped in your store for that product total. Let’s say fewer people are shopping your store but more are actually purchasing. Understanding where you are losing is important – why are shoppers not shopping you? Why are they shopping somewhere else? We all know the hardest part is getting the customer in your store so we cannot let them leave without buying something! What impacted your draw or close rate this quarter?

Walk Rate

If the close rate is down then I want to know why: I dig further into understanding the walk rate (those customers who walked away from you to buy somewhere else).  For example, TraQline allows you to run a report detailing  the “whys behind the buys” of consumers who shopped at one retailer but purchased at another. (Note: Remember to look at your sample sizes as you add multiple filters).  Here are a few things to consider as you look at Draw & Close Rate:

  1. If Draw is down, look to see if a retailer is losing share and causing the brand share to go with it (brand penetration report).
  2. If Close is down, look to see if a retailer is also trending down or if there is a brand that is trending up (brand penetration Report).
  3. If Close is down, you can also look to see if there is a price point driving the loss (Average Price Paid Report).
  4. If Close is down, look at the walk rate and see which competitors might be capitalizing on your customers who walk out to purchase elsewhere (Bought Elsewhere Report).

Not sure where or how to start? Call your account rep today, they would love to help!

3. Average Price Paid can take you a little Further

We know from above that APP can impact overall share; a higher priced item would yield a higher dollar share versus unit share. However, let’s say you review APP and you don’t feel quite content with the results – we would encourage you to dig deeper. Try applying a filter on the ‘price bucket’ variable to see how you perform among other brands with a higher price point. For example, if your lowest price point on a product is $250.00, exclude all the brands priced under the $250.00 mark.

Low/medium/high pricing tiers help determine which brands or retailers are executing on different pricing strategies and may show where there are opportunities to create new products. For example, let’s say a retailer has a product category that falls into the ‘best’ or high level for price and quality. They may be missing the ‘good’ or low-price tier. This creates an opportunity to meet an additional demographic’s needs by developing a proprietary branded product to gain more sales (and ultimately more share) for the category overall.

4. Brand Mix can influence Outlet Market Share Changes

Whether there was an increase or decrease in your unit or dollar share, looking at the brand mix can provide insight. Has a retailer added a brand to a specific category? Or have they dropped a brand? If so, the addition or removal of a brand at a retailer can play a role in how products’ shares move because ultimately it affects the brand sales.

One way to see how changes in your brand mix have affected shares is to examine what brands are currently being sold compared to what was available during a previous time period. The 2019 addition of the Crafstman brand at Lowe’s provides a perfect example. Since adding Craftsman to their brand mix, share has increased. It is reasonable to hypothesize that adding Craftsman to their Brand Mix (and the closing of Sears stores) increased Lowe’s share overall. The same principle could be true in reverse- dropping a brand could cause a corresponding drop in share.

5. Look at the Map: Geography can impact your Share

One key variable that often gets overlooked is Geography. The ability to drill down into CMAs, DMAs or even custom-defined regions gives us a whole new perspective to what might be happening in that region or market to change the share overall. For example, if a retailer only operates in one region, comparing its market share to that of national players wouldn’t give an accurate look at its performance (for more info on this specific report, you can read up on door-to-door analyses here). Or perhaps an advertising campaign has been more successful in one geographical region than in another. Other examples might include new players in only one or two regions versus the entire country or perhaps the bankruptcy and closing of others.

As you can see, there are a number of things you can look at to determine where and why you are losing or gaining share. Hopefully these five examples can help you build your roadmap and tell your story. If you have questions or want to explore additional reasons you’re seeing changes in your shares, contact your TraQline rep today.

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TraQline's Dave Stevenson, PH.D President & CEO
Dave Stevenson, PH.D
President & CEO

Before launching The Stevenson Company in 1995, President and CEO Dave Stevenson managed worldwide research for product development, distribution, advertising, and customer satisfaction. His roles, first as head of the marketing section of General Motors’ worldwide product planning group, and later as director of GE Appliances’ global economics and market research team, give him extensive experience in consumer as well as business to business marketing solutions. Mr. Stevenson holds a Ph.D. in statistics from Southern Methodist University.