Welcome to the MA(rketshare)TRIX

By Raghuraman, P

15th November, 2015

"When in doubt, go for market share" - golden words drilled into me by my “tough nut boss” more than a decade and a half ago. When you become a business manager or product manager or category manager (each of the designation massages your ego at different stage of your career especially with the prefix of "country" added to it) the safest way to build your reputation and protect your job is to deliver market share growth, irrespective of whether you will deliver your revenue and/or margin targets.

 

A sound and sensible business means selling to good customers who give you good revenue. By good revenue I mean a win-win transaction that delivers a decent margin, which in turn translates into decent profits, after netting off costs and expenses. Market share is an additional metric that allows you to know where you stand in the market vis-à-vis’ your competition. You maintain and grow your market share by taking good care of your existing customers, attracting new "win-win" customers with reliable products & services and countering competition moves smartly. All these translate to a good P&L statement and a healthy balance sheet.

 

 But what I have seen over the years are Business Managers, who do not even know how to read their own company balance sheet or P&L statement. All they know is - what price one must discount to win that big deal or what channel scheme should one give so that inventory can be dumped - to ensure they do not lose market share or they buy their market share growth artificially, to save their backsides temporarily. Picture today's business scenario of many big companies, they have a weak P&L which has fallen a victim to the demanding customers who bought from them below cost and still remain unsatisfied, or their channel partners sucking their blood to sellout the inventory which they have already bought at special prices in the quarter end. Market share is the only thing they talk about with pride!

 It is like Pandavas winning the war but after suffering huge number of casualties on their side. Slightly better analogy would be England winning the second world war and forever becoming a pale shadow of their past because of the price they paid to win it. The collateral damage are the good customers who cannot get exceptional service because of perennial cost pressures of these companies and honest sales managers who see themselves losing out to ordinary colleagues who know how to achieve their targets by "buying business" helped by the desperate Business Manager who wants market share.

 

 Who is to blame for this obsession with market shares? Is it the nature of the industry, the investors of these corporations wanting growth, the senior managers of these corporations or the market research companies who forecast a certain growth, which becomes the yardstick for quota/target setting.


Lets analyze each of the above factors:


Industry – Cannot be! Every industry has few top brands who are more focused on their P&L and really don’t care about the market shares, beyond that of measuring and monitoring market trends and competition moves.
Investors – Cannot be in the long term. Short term, yes! till the business scales up. But once scale is achieved, the investors want return on their investment.


Senior managers – Yes and No. There are many senior managers who find that it is easier to achieve market share than deliver profit! They do not have time or patience to groom a Business Manager.


Market research firms – Yes and No. Lets look at the role of market research firms closer. First of all I would like to complement them for doing the fantastic job of taking data from their clients free of cost and selling the same back to them for a hefty sum. Secondly they tell their clients that market size is going to be “X” over the next quarter and in middle of the next quarter revise it down to 0.8X or increase it by 1.2X. And you know what the best part is, they get away with it scot free.

 

Imagine a Business Manager, whose target has been fixed basis the forecasted “X” and basis which he has planned the inventory for the quarter which takes almost 8 weeks to arrange, considering the supply chain constraints. Now he is told in middle of the quarter by this market research firm that “we are revising the market size downwards by 20%” for this quarter! What does this poor guy do! He is saddled with excess inventory, which he tries to get rid of, by sacrificing on margin and channel health!

 

Look at another scenario, when he is told in middle of the quarter by this market research firm that “we are revising the market size upwards by 20%” for this quarter! What does this hapless guy do! He loses market share! and gets beaten by his bosses for being caught napping!

 Icing on the cake is always the hilarious press release from these market research firms, post the quarter, which will in essence say, “we told you so!”

 

To all the business managers who are caught between their bosses and the market research companies, all I can say is "When in doubt, go for market share".
 

Suite No. 1102, Tower 1, Unitech Harmony, Nirvana Country, Sector 50 Gurgaon - 122018 raghuraman@salezart.com Tel: +91-9811696976