In Jan, Feb, Mar and April, you sell an average of 180 (new and used) vehicles per month. You hire a marketing company for May, June and July. During that time you average 210 vehicles per month. Best money you ever spent, right? WRONG! You don’t operate in a vacuum What did the market (overall demand) do in May through July compared to Jan through April? What did your brand do?
The calculations below exhibit why you are being fooled by both ‘good months’ and ‘bad months’
Average number of vehicles sold in a 20 mile radius of your store Jan – April per month = 10,000
Average number of vehicles sold in a 20 mile radius of your store May – July per month = 15,000.
Your 180 per month average Jan – April = 1.8% (market share)
Your 210 per month average May – July = 1.4% (market share)
Just to give you an idea of what you LOST, yes lost, not gained with your new marketing company: 1.8% of 15,000 = 270 vehicles sold!
You are giving credit to your new marketing for selling 210 cars instead of 180, but what really happened is you failed to sell 270 per month had due to your LOSS of market share!
It also turns out your brand (say Ford in this case) was actually slightly up in May – July over Jan – April as well. This means you lost even more.
Let’s say Jan – April in a 20 mile radius of your store, an average of 4,000 new vehicles are sold per month. That gives your brand a 10% market share (among new vehicles sold in that area). However, during the May – July period in the same radius, an average of 5,500 new vehicles are sold. New Fords account for an average of 572 per month = 10.4% share of the new car market.
Is it beginning to sink in? New Ford’s share of the market were up and YOUR share was down. If you had ridden on the surge of your brand’s demand AND retained your market share (at 1.8%), you would have sold even more vehicles per month in the May – July period.
Conversely, if you are doing something right when the market goes down (less vehicles sold in your area) and you increase your market share, you’ll probably sell less cars than you did in the up market, but you’ll sell a lot more than you would if you share goes down.
Without measuring your performance in comparison to the market and your brand, you are being fooled and you are often giving credit (good and bad) where it is NOT due. You think something worked…and it didn’t really (it was just the result of an up market, but not fully taking advantage of it). Or even worse, you think something didn’t work because the market was down. If you gained market share in a down market, you didn’t know it and you threw away a good marketing system because you didn’t even know it was working for you.