Market Share Component Analysis

1. Market Share Component Analysis From a Competitive Prospective See page 418 Chapter 15

2. 4 Elements of Revenue • Price x Quantity • But Quantity decomposes into • Quantity = (number of customers) x (number of visits or purchase occasions) x (Size or Volume of the purchase)

3. Four Components • Market Share = (Customer Penetration)x(Customer Visit Loyalty)x (Customer Volume Selectivity)x (Price Selectivity)

4. Four Components • where(Customer Penetration) = number of customers you have / number of total customers(Customer Loyalty) = number of transaction you get / total number of transactions (Customer Selectivity) = average size of your transactions / average size of all transactions (Price Selectivity) average price of your transactions/ average price of competitors

5. For Example • You have a Hotel that generates $12 million in sales a period. • In your little city there are several hotels and the total revenues for the city are $200 million. • What is your market share?

6. For Example • You have a Hotel that generates $12 million in sales per period. • In your little city there are several hotels and the total revenues for the city are $200 million. • What is your market share? • Market Share = $12/$200 = 6%

7. Changes in Market Share • Last year your market share was 5% what accounts for the improvement?

8. Number of visitors Average number of trips a visitor makes per season Total days stayed Price per Night Our Revenues 10,000 3 2 $200 $12 million Last year your market share was 5% what accounts for the improvement? 10,000 2.5 2 $200 $10 million

9. Increase in Visitor Visits • You claim it was your special in-house fat-farm events that brought them more often. • Your detractor claim that city had more special air show races and your marketing efforts don’t deserve any credit

10. Number of visitors Average number of trips a visitor makes per season Total days stayed Price per Night Our Revenues Yours 10,000 3 2 $200 $12 million Last year your market share was 5% what accounts for the improvement? City 200,000 2 5 $100 $200 million

11. Number of visitors Average number of trips a visitor makes per season Total days stayed Price per Night Our Market Share = .05 x 1.5 x 0.4 x 2.0 .05 1.5 .4 2.0 .06 Last year your market share was 5% what accounts for the improvement? 200,000 2 5 $100 $200 million

12. Number of visitors Average number of trips a visitor makes per season Total days stayed Price per Night Our Revenues Yours 5% 150% 40% 200% 6% Reporting Market Share as percentages of City 200,000 2 5 $100 $200 million

13. Four Components of Market Share • where(Customer Penetration) = number of customers you have / number of total customers(Customer Loyalty) = number of transactions you have/ total number of transactions (Customer Selectivity) = average size of your transactions / average size of all transactions (Price Selectivity) average price of your transactions/ average price of competitors

14. Four Components • Market Share = (0.05 Customer Penetration)x(1.50 Customer Loyalty)x (0.40 Customer Selectivity)x (2.00 Price Selectivity) • Market Share = 0.06 = 6%

15. Four Components Analysis allows for what if planning • Market Share = (0.05 Customer Penetration)x(1.50 Customer Loyalty)x (0.40 Customer Selectivity)x (2.00 Price Selectivity) • Market Share = 0.06 = 6% What if relative order size improves to .5

16. Four Components Analysis allows for what if planning • Market Share = (0.05 Customer Penetration)x(1.50 Customer Loyalty)x(0.50 Customer Selectivity)x (2.00 Price Selectivity) • New Market Share = 0.05 x 1.5 x .5x 2 • New Market Share = 0.075 = 7.5%

17. Questions?