Fair share – Am I really the best?
The fair share is the market share a given actor or product should/could claim on a market.
What it does.
The fair share can be used with two objectives in mind:
1- To set a goal without a comprehensive analysis of the market.
e.g. Company A launches a new product. Given the historical performances of its existing businesses, what market share – in volume or value – could Company A expect?
2- To get a quick judgment on a given level of market share.
e.g. Is Company B performing at the level it should? Is its market share high enough? On the flipside is it overperforming compared to legitimate expectations?
How it works.
Objective 1- Setting the faire share of a given actor.
The fair share is often the market share of the most relevant related segment.
ex. General Motors is launching a new SUV crossover. What’s their fair-share? In that case their fair-share’s estimate would be their usual market share of the segment.
In the absence of information, we can sometimes estimate the fair share as follows :
fair share = 1/(number of actors)
Objective 2- Comparing a given actor’s market share to its fair share.
After having estimated the actor’s fair share as previously explained, you can calculate its performance index, as follows:
Performance index = market share / fair share
If performance index < 1 : the actor is underperforming in its market.
If performance index > 1 : the actor is overperforming.
Let’s create an example here with a simplified and made-up retail situation. Imagine a fashion retailer with 4 points of sales (PoS in the data table). These 4 points of sales are of different sizes and generate turnovers between $k1 000 and $k2 500. They also display a ranges of products comprising between 4 and 7 types of products, one of which being T-shirt. We focus here on:
1- defining the fair-share of T-shirts in each point of sale,
2- determining if T-shirts are performing well (selling well) in each point of sale.
Here are the data:
in black are the assumptions (data given to us) and in blue our calculations.
We started by calculating the market share of T-shirts inside each point of sale:
market share = T-shirt sales / total sales.
This amounts to 15,0% for PoS1 (=375 / 2 500)
Then we calculated the fair share of T-shirts in each point of sale:
Let’s assume that in each PoS all types of of products should sell evenly.
Therefore the fair share of one given type of product should amount to Total sal