A reader writes:
I work for an insurance firm, managing their International Medical Health marketing arm. Our target market consists of high-net worth individuals and top-notch companies. My core responsibility is to market the service and increase our market share. Although we’ve not done badly, we’ve not yet made our quota. I’m wondering if you could give me a few tips on how to turn things around.
Sure. The reason you aren’t making your sales numbers is that you’re focusing on “market share” rather than helping the sales staff to sell. Let me explain.
Market share is an abstract concept that has no real meaning in the real world. Take, for example, the PC market. Every quarter, the big market research firms issue reports about which PC manufacturer is selling the most PCs. However, while HP may sell more numbers of PCs than Dell in a quarter (or vice versa), that’s not particularly meaningful, because:
- Markets are infinitely segmentable. Within the traditional PC market, you can find numerous segments and sub-segments. The PC market separates into desktops and laptops. Desktops break up into business machines, home machine and gaming machines. Laptops break into desktop replacement, mobile computers, and sub-portables. Gaming machines (like Alienware) compete in a certain sense with gaming consoles (like the xBox 360). Similarly, sub-portables compete with high-end smartphones. Where do you draw the line? It’s completely arbitrary.
- Unit volume sales are irrelevant compared to profitability. The reason that people think “market share” is important is the industrial age notion that if you make more widgets, you can make them at a lower cost and therefore make more money. That’s not even 20th century thinking; it’s 19th century thinking. For example, the company that makes the profit on each PC sold is (gasp!) Panasonic, a company whose unit counts are so tiny that they never show up in any market share lists.
Why do companies focus on market share? Simple. Marketing groups want to avoid being measured on something that’s actually relevant to the business, like the lead conversion rate. By setting up “market share” as a malleable report card, they give themselves the license to trot out imaginary market segmentations that show how the company is “winning” — even if sales is struggling and the company is losing money.
In the worst cases, the marketing groups bribe second tier market research firms to come up with bogus segmentation reports in order to “prove” that their marketing efforts have been successful. I have seen this happen with my own eyes.
In short, market share is a minimally useful concept. Most of the time it’s pure marketing bunkum and unworthy of serious attention.
Defining your job as “increasing market share” is putting your mental energies into a largely meaningless context, particularly in a business like high-end insurance, where every product is customized for each customer. Seriously, what does “market share” mean in this context? Nothing. And that’s why your marketing efforts fall flat.
You need to focus your marketing efforts ENTIRELY on lead generation and sales training. Your marketing goals should be identify sales leads that are highly likely to convert, and to have a sales staff capable of taking those leads and converting them from suspect to prospect to customer.
Every second that you waste thinking about markets share is just adding to your cost of sales, without adding any value.
