Reasons to Not Build Market Share
As important as building market share in a down market is for most companies, there are actually good reasons why you might not want to build market share, regardless of where we are in the business cycle. And we can help there, too.
There are six traditional reasons why a business might want to reduce its market share or, at least, not increase it.
- Capacity Limitations
While most companies have excess capacity during a recession, you may not have that problem. You may have already reduced capacity in response to declining sales, or you may simply be at your limit. To add sales or market share might require you to add capacity, which would move your break-even point up past what you can reasonably sell, and make those additional sales unprofitable, at least for a time. If this is a concern, JV/M can help you figure out whether increasing capacity can be worthwhile, and how to shorten the payback if it is.
- Unprofitable Accounts
You may have wanted every piece of business you could get as you were growing your business, but oftentimes the smaller or more complex customers that you acquired on the way up become less profitable when you're bigger, relative to your other accounts. JV/M can help you figure out how to make a strategic exit from unprofitable accounts that can increase your profitability, while actually reducing your market share.
- Excessive Cost-of-Marketing
Even though adding market share tends to have the best ROI of any marketing strategy, the implementation may still be more expensive than you can afford. A good business model, which JV/M can help you build, can tell you whether this is the case; but if you can't afford the cost of the marketing that it will take to build market share, it may not be worth doing.
- Fear of a Price War
While building market share doesn't require a strategy of lowering price, your competitors may react to your efforts by lowering their prices - and make the market less profitable for you. If this is a concern, though, JV/M can show you how to actually win a price-war.
- Fear of Attracting Competition
The good news about building market share is that you could create a whole new market. The bad news is that it could cause a major competitor to enter the market and take it over. Some people view that as an opportunity to be acquired; but if the kitchen gets too hot, you may have to get out. JV/M, though, can show you ways to forestall competition, maximize your power to resist it, and position you for an advantageous sale, if you're worried.
- Fear of Anti-Trust Action
It is certainly possible that your efforts to build market share will be successful, and then result in anti-trust issues. And to be sure, there are right ways and wrong ways to behave, and staying on the right side of the law is important - which we can help with. But if you're sensitive to oversight, this is a caution.
JV/M Can Help
Whether you're trying to add sales or just manage them, it turns out that it really is all about market share. Managing your market share, and your position, is the key to success whether you're trying grow sales, maximize profitability, or just trying to stay afloat.
Whether you want to build market share, or just manage it, JV/M can help. Call us today to find out how.
[It's all about Market Share]
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Moorestown, NJ 08057
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