Page 74 - Duct Tape Marketing

58 Part I: Getting Started in Marketing

For instance, imagine a fabric and sewing supply store in Albany, Georgia,
that serves a geographic area that includes 7,000 homes located within a
15-minute drive of the store. The owners could turn to the Lifestyle Market
Analyst profile for consumers who participate in “Sewing” and see that
18.5 percent of the households in the Albany area participate in home
sewing. Armed with this fact, they could multiply their 7,000-household
market area by 18.5 percent to learn that they have 1,295 potential cus-
tomers in their geographic market area. If the owners currently serve 250
of these potential customers, then they have a market share of just less
than 20 percent — meaning plenty of opportunity for growth.

ߜ Based on total sales volume: Another way to estimate market share is to
arrive at a total estimate of how much people are spending at businesses
like yours in your market area each year and divide that figure by your
own sales revenue. For example, if you determine that total annual sales
in your market area are $5 million and your business does $500,000, you
can estimate that your business has 10-percent market share ($500,000
divided by $5,000,000 total market sales).

Regional business journals and newspapers compile “Top 25” lists rank-
ing businesses in industries or service sectors ranging from architects to
zoos. Businesses submit their revenues (often slightly inflated, so read
them with a realistic eye) as a basis for appearing in these lists. Within
the lists for your industry, you’ll find clues to regional sales revenues in
your field.

Market share: Sample calculation

Suppose that Green Gardens, a residential land- landscape services in the given market area
scaping business, serves a market area that annually. If the estimated total sales volume is
includes 20,000 houses, of which approximately $4 million, and if Green Gardens has annual
10 percent use landscape services. This creates sales of $600,000, then Green Gardens has a 15-
a total potential residential landscape service percent market share ($600,000 divided by $4
market of 2,000 homes. If Green Gardens has a million).
client roster that includes 200 homes, then it has
a 10-percent market share based on the total If Green Gardens analyzed its market share
number of potential customers in the area (200 based on unit sales (number of houses served)
divided by 2,000). and based on dollar volume, its owners could
conclude that although they have only a 10-per-
Another way to look at market share is by dollar cent share of the houses served, they have 15
volume. Green Gardens could estimate the rev- percent of the total dollar volume. This finding
enues of each of its competitors and then add could lead them to conclude that they are serv-
those figures to the Green Gardens revenue ing larger-sized accounts than some of their
figure. That would produce an estimate of competitors. And based on that, they should
the total amount being spent on residential have a small celebration!