Market Share and Market Potential in the Aftermarket: What’s the Difference?
by Derek Schroeder
You know that there is considerable profit to be had from improving sales performance in the aftermarket for OEMs. How do you know though, how much your company needs to increase aftermarket business by?
Perhaps your company already has a healthy share in the aftermarket, in which case your goal might be simply to maintain the status quo and keep in front of the competition. On the other hand, perhaps your competitors currently have the jump on you and in order to get ahead, you need to double your current aftermarket unit sales. The size of your market share should figure prominently in your aftermarket strategy for growth.
Don’t Confuse Market Share with Market Potential
It’s critical to understand the difference between market share and market potential in the aftermarket, yet these two metrics are a common cause of confusion. Manufacturers often view the aftermarket singularly and confuse their actual market share with that which they could potentially acquire. Overestimation of share in the aftermarket for OEMs for example, can easily occur when parts manufactured by a third party are left out of the equation.
For instance, suppose you calculate your market share on the basis of revenue from equipment parts that your company actually manufactures. Now suppose that share works out at 11% of the total revenue yield. Do you really have an 11% share?
What about the parts your customers purchase elsewhere? The equipment you sell may use parts that you purchase from a supplier instead of manufacturing in-house; things like filters, bearings, or gearboxes. If you are not selling those items, your customers have no choice but to buy them elsewhere, perhaps from competitors you hadn’t included in your market evaluation. Looking at items you manufacture as a “whole” instead of an “each” and adjusting your aftermarket strategy accordingly will enable you to realize more potential for growth.
Market Potential in Aftermarket Strategy: Why Does it Matter?
As Harvard Business School economists Robert D. Buzzell, Bradley T. Gale, and Ralph G.M. Sultan explain in a Harvard Business Review article (Market Share—a Key to Profitability), larger market share generates a number of spin-off advantages, which include:
- Higher profit margins
- Lower purchase to sales ratios
- Reduced marketing costs as a percentage of sales
- Higher product prices
- Improved product quality
These advantages should provide more than enough incentive to analyze and track both market share and market potential in the aftermarket. Market share in particular can be a highly motivational measurement, especially if you publicize a drive to get ahead of the competitor that immediately leads you. This is even something you can target as part of individual employee performance management and incentivization, provided you help your salesforce to understand why it matters.
The Role of Analytics in Meeting Market Potential
Using market share expansion as a performance incentive requires that you constantly monitor sales data and present it in a way that everyone in your business can comprehend. A good aftermarket analytics platform, capable of displaying data in easy-to-visualize formats, can make ongoing measurement less of a chore and correspondingly, less likely to be neglected.
Equip from GenAlpha simplifies monitoring and management of the aftermarket for OEMs. It has an integrated data analytics module, enabling analysis and measurement of market share performance. Data is translated into actionable information in real time and presented as concise, comprehensible dashboard visualizations.
You can find out more about eCommerce Analytics and of course, if you have any questions, our simple online contact form will get you swiftly in touch with a GenAlpha aftermarket specialist.