THE ENDURING PROFITABLE GROWTH OF MARKET SHARE

For a very long time, market share has been a prioritized goal. Gaining market share continues to be the most convenient litmus test for success. On a single day in September, typing the phrase “market share” into LexisNexis turned up 1,263 articles citing market share percentages. We are told from the minute we take a business class, that the pivotal role of marketing over the long term is to grow and maintain market share. Today, marketers live in a “grab-and-go” world where gaining market share is the key arbiter of success.

However, there is another view: that is, the bottom line of the business is not market share but the enduring profitable growth of market share. This view states that building brand loyal market share is the basis for enduring profitable growth. Is the core base of the market share fickle, deal loyal or is the core base durable and brand loyal? What share of our market share is brand loyal? It is important to distinguish between brand management where 1) the goal seems to be to build market penetration and market share, and 2) the goal is to create and reinforce brand loyal customer relationships.

Market share can be increased in a variety of ways. Increasing market penetration, attracting new customers through promotions, deals, discounts will grow penetration and share. But, growing share at any cost is a cost. We create deal loyal customers rather that brand loyal customers.

Building brand loyal share is a key concept. Repeat behavior is not the same as brand loyal behavior. Repeat behavior can be a result of habit, convenience, special deals for repeat purchase, and so on. Loyal repeat purchase is a result of brand preference because of true commitment to the promise of the brand.

Brand loyalty is built by strengthening customers’ relationships with the brand. Psychology tells us that brand loyal behavior is built by strengthening the connection with the brand through positive reinforcement of the brand experience. Reinforcement is not the same as maintenance, although some marketers use these two words interchangeably. To reinforce something is to make that something even stronger.

Brand loyalty is biased behavior, resulting in brand preference even if a competitive alternative is slightly lower-priced or more convenient. Repeat behavior can be the result of inertia or incentives. Repeat behavior can be bought through bribes. Brand loyalty is behavior that is based on true preference for a brand.

Huge databases of customer behaviors only provide part of the picture. Analysis of behavioral databases is incomplete marketing. It is incomplete because it focuses on what customers do without understanding why they do what they do.

Customer behavior is not mindless. Market share percentages without understanding mindful attitudes are lines without the coloring inside the lines. Every customer has a mind attached.

Brand loyalty is not an on-off switch. Customers are not loyal or disloyal. Customers are more or less loyal. Brand leaders must focus less on creating loyal customers, and focusing on making loyal customers more loyal.

Loyalty is a ladder. Some of a brand’s customers are brand indifferent. Some customers have a consideration set of brands. Some have a short list of 3 brands from which they habitually buy. Other customers have a particular brand they prefer to buy relative to other alternatives. And then there are customers who are so enthusiastic about the brand that they are willing to pay a premium for the brand even when the price of their second choice brand is 5% to 10% less.

To grow profitable market share, move people onto and up the ladder. Of course, it is important to attract new customers. But, for enduring profitable growth of that penetration-based growth in share, encourage new customers to climb up the loyalty ladder. Market share is a reflection of quantity of customers. Also look at the quality of market share. What share of your share is truly brand loyal?

Brand leaders must move beyond winning and keeping customers to winning and strengthening customers. To grow a brand profitably means not just creating a customer, but strengthening the customer’s convictions that the brand purchased is the right brand for their needs.

Marketing must change the debate its focus from penetration-based market share to brand loyal-based market share. Brand loyalty is a difficult needle to move. But, it is worth the effort. A small increase in loyalty can have a big impact on profitability.  Increased brand loyalty can help create a strong defense against margin squeeze.

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