19 February, 2012

Review: Manage for profit, not market share


Having read Hermann Simon's excellent "Hidden Champions of the 21st Century", I got hold of another of his books "Manage for Profit, Not for Market Share: A Guide to Greater Profits in Highly Contested Markets", co-written with Frank Bilstein and Frank Luby, colleagues from Simon's consulting firm. It's my guess that companies make more mistakes about price than anything else, even otherwise well-run businesses.  The root cause seems to be a massive over-reaction to the possibility of losing a sale, of not being the first choice of 100% of the market.  Overturning that instinct has been a feature of every turn-round situation I've encountered.

The authors start by debunking one of the most misunderstood pieces of business research, the PIMS study (Profit Impact of Market Strategy). It's trotted out by business schools as proof that the company with the most market share has the highest profitability, and so businesses have chased market share believing it will result in greater profits. But the proponents confuse cause and effect. Many factors lead a company to having both the highest market share and the highest profitability.  It is the success of all those factors that produces both results.

The book takes the reader though a host of different situations, showing the common errors and giving easy-to-follow case studies of smarter strategies.  I particularly liked the one for low growth markets: instead of dropping prices in a death spiral with your competitors, put prices up.  And there are many more, on topics as diverse as product and service bundling, product range optimisation, market segment strategies, sales force remuneration, marketplace signalling, and so on.

"Manage for Profit, Not for Market Share" is an easy read, full of examples of good and bad decisions, and I have no hesitation saying this book should be read by anyone in a marketing or executive role.


Disclosure: Isambard receives commissions from Amazon for purchases made via links from this website, but that has not influenced my opinion.

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