Archive for the 'Market and Share Metrics' Category

Share Development Index

Published on February 18, 2010 by Roger Best in Market and Share Metrics. 0 Comments

This company’s surgical device offers many benefits with respect to reliability and time required for this heart surgery procedure. However, market share for this high performance surgical product is hindered by equipment needed, reluctance among surgeons to try something new, trial success, and adoption of the product following a successful trial. These share performance metrics and product awareness are built into the Share Tree above in the sequence these aspects of share performance occur.

For each share performance gate in the share tree, the business estimated its current performance.  For example, only 50 percent of the market has the equipment in place to use this high performance surgical product. Of those that have the required equipment in place, 90 percent are aware of the company’s product and procedure. However, 35 percent of those with required equipment and aware of the product are not motivated to try the product/procedure. This results in a share leakage of 18.9 percent as shown in the share tree. When all positive share performance outcomes are multiplied sequentially, an overall Market Share Index of 6.8 percent is computed as shown below.

Market Share Index (MSI)

MSI =  Equipment  x  Aware  x  Motivated to Try  x Trial Success  x  Adoption
=       50%     x    90%     x     60%      x      50%      x      50%
=      6.8%

Using the same share tree, the business team estimated the upper end performance for each share metric. This is their Share Potential Index as illustrated below.

Share Potential Index (SPI)

SPI = Equipment  x  Aware  x  Motivated to Try  x  Trial Success  x  Adoption
=       75%      x     95%       x      70%      x      67%      x       67%
=      22.4%

If we divide the Market Share Index by the Share Potential Index and multiply by 100, we can create a Share Development Index. The current Share Development Index is 30, as shown below.

Share Development Index (SDI)

SDI  =  Market Share Index (current) /  Share Potential Index     x   100
=      6.8%   /   22.4%     x   100
=     30

The blue boxes in the share tree above are share performance benchmarks set by the company. If successful, this will improve their Market Share Index from 6.8 percent to 15.8 percent.  Using the same Share Potential Index (22.4 percent), this would improve their Share Development Index from 30 to 70 as shown in the dial above.

While the Market Share Index computed using the share tree only approximates actual market share, improvements in these measureable share performance metrics should contribute to actual share gains.

To learn more, go to www.marketingmetricshandbook.com, view the  Intro Video, and download a 30-day demo.

Market Development Index

Published on February 17, 2010 by Roger Best in Market and Share Metrics. 0 Comments

The Market Development Index is a very important metric that helps businesses gauge their market growth and the approximate year the market will approach full market penetration. As shown above, it is a simple ratio of current Market Demand to Market Potential. However, most businesses do not think about their market potential. Thus, the first challenge in applying this metric is estimating your market potential.

NARROW MARKET DEFINITION – (Orange Dot)

This medical devices business unit produces a surgical device that is used in heart surgeries. They had limited their market definition based on a certain type of hospital that would do this surgery. The current market demand for this disposable device was 35 million per year. Conventional wisdom was that the market was maturing and would reach full Market Penetration of 45 million devices per year in 2020. These estimates would yield a Market Development Index of 78%. This means that they should expect market growth to slow and begin to saturate in 2020.

Market   =  Maximum Number  x  Percent Who   x   Purchase Rate
Potential    Consuming Units             Can Buy                   Per Year
=    300,000 surgeons        x              50%           x        300
=    45  million units per year
MDI = Current Market Demand/Market Potential x 100
=   35 million per year / 45 million per year    x    100
=    78%

BROAD MARKET DEFINITION – (Blue Dot)

The team rethought its market definition following a team discussion around why potential customers were not buying their device. As shown below, this raised the market potential to 75 million surgical devices per year, lowering the Market Development Index from 78 percent to 47 percent. In addition, it will now be 2030 before this market can be fully developed with the broader definition of potential customers. Of course, this greatly changes the required marketing strategies and the potential in sales and profit growth over the next 20 years.

Market   =   Maximum Number    x   Percent Who     x   Purchase Rate
Potential      Consuming Units              Can Buy                   Per Year
=    500,000 surgeons           x             50%               x        300
=    75  million units per year
MDI  =  Current Market Demand / Market Potential   x   100
=    35 million per year / 75 million per year    x    100
=    47%

To learn more, go to www.marketingmetricshandbook.com, view the  Intro Video, and download a 30-day demo.