How Big – Share Price and Margin
By David Matheson 
3
min watch
How Big? Market Share, Price, and Margin
Market share, price and margin can create a kind of swirl, a kind of circular thinking.
So, you want to think about your strategy and define yourself and get clear about your value proposition. Think about the strategy you’re using and hold that fixed.
Avoid the circular logic. Define a strategy in the market to get to the heart of the critical questions you need to have in these areas.
Transcript
How Big? Share, Price & Margin
So I want to make a little commentary on these last three here. Market share, price and margin. They can create a kind of swirl because, of course, if you lower your price, you lower your margin and you get higher share. Or if you want to go for higher price, you get lower share and it can lead to a kind of circular thinking. So what you want to do with these is really think about your strategy and define yourself.
Am I going to be a premium product in this segment? You get clear about your value proposition, or perhaps you’re going to be a price taker. The price is going to get set in the market and you’re going to follow. Or maybe you’re going to be a follower, you’re going to cut and you’re going to go for volume. Think about the kind of strategy you’re using and hold that fixed. And then I think you’ll find, as you look at these things separately, you’ll see they actually kind of tease apart because some of them are going to be defined by the market and some of them are going to be defined by you.
And if you do this, what you’ll find basically is that price is going to become: what is the customer’s willingness to pay? And it’s going to kind of shift towards that center of meaning. How much is somebody going to pay for this in a market or based on your value proposition or whatever. But it’s kind of a function of your strategy. Market share is going to have to do with your overall competitiveness for reasons having to do with things perhaps other than price, like your position in the market or how good your advertising is, or how good your reputation is or your channels or something like that.
And then margin is going to translate to what’s your ability to deliver efficiently. Now, these are three critical kind of management questions. How competitive are we? What’s our customer willingness to pay and how well can we deliver and make money on that? And so you kind of want to focus on those in the innovation. So, avoid the circular logic, kind of define a strategy in the market, and I think you’ll find you can work your way through these and really get to the heart of the critical management questions you need to have in these areas.
