TVP – Metric 13 Market Share

Resource Type
Tool
Authors
Alan Fusfeld, Innovation Research Interchange
Topics
Innovation Metrics, Stage-Gate, Tools and Techniques
Associated Event
Publication

Background | User Guide | Program Contents | Stakeholders | List of Metrics

1. Metric Definition

Firm (or business unit) market share in various product categories measured as appropriate for the industry or category, expressed as a percentage of the total market.

2. Advantages and Limitations

This metric is meant to reflect value creation for the firm and the value of the firm’s technology. Similar to gross profit margin metrics, caution must be taken in the interpretation of market share data from the perspective of measurement of the contribution of R&D activities to the whole. There can be many confounding factors in a market share determination, such as the size and quality of the marketing effort, the competitive response, the relative state of the economy, etc. In some firms it is the case that changes in market share from one period to the next are much more directly attributable to R&D than the level of market share at any given time.   Another limitation is that in many industries the intensity of competition is such that substantial R&D investment is necessary just to keep the firm’s earned share of the relevant markets.

3. How to Use the Metric

Changes in market share should be assessed at least annually to determine the rate of progress or decline. The expectation is that improvement in a firm’s technologies and products will result in a greater share of the market. Market share is a retrospective metric, showing the results of past technology or product introduction to the market. Since competitors’ market share data is usually available, this is a metric that can be used as a benchmark with the competition.   As is the case for the R&D financial return metrics, it amy be that with modest effort the tracking of R&D impact on market share can be automated to some degree. 

4. Options and Variations

As an indication of threats or opportunities, share data in markets related to a firm’s products can be followed. This “related market share” metric can serve as a component of a strategy to anticipate the potential application of similar technology into a firm’s marketplace.

5. Champions and Contacts

6. References