Increasing market share doesn’t
pay off for most firms, say
Alexander Edeling of the University
of Cologne in Germany
and Alexander Himme of Kühne
Logistics University in Hamburg,
Germany. Their meta-analysis of
89 empirical studies published
over 45 years finds that a 1 percent
increase in market share
increases average financial performance
by only 0.13 percent.
Other research by Edeling
shows that firms enjoy bigger
payoffs when they invest in
building customer relationships
and brand awareness, actions
that deliver six times and nearly
three times the impact of gains
in market share, respectively.
Maintaining high market
share often comes with costs:
It sometimes requires companies
to cut prices or advertise
aggressively, both tactics that
can hurt profits. In today’s digital
marketplace, says Edeling,
companies might have more
success if they manufacture
in low-cost areas and sell to a
global marketplace.
Instead of chasing market
share, Edeling and Himme suggest
that firms innovate their
products, enhance customer
service, and build brands with
high-potential customer bases.
“When Does Market Share
Matter? New Empirical Generalizations
from a Meta-Analysis
of the Market Share–Performance
Relationship” appeared in the May 2018 issue of the
Journal of Marketing.