Market share numbers from the market research analysts can provide interesting insights into the direction a market is going. However, relying on the numbers alone without understanding how they are created or the assumptions that went into their research can lead to the wrong conclusions
There are a variety of common mistakes that market research consumers make. Consumers of market share numbers need to be aware of these types of mistakes and work to avoid them including:
- Not distinguishing between the date of publication and the period covered
- Not understanding the difference between historical “market share” numbers with winners and losers and “forecast” research that quantifies market direction
- Using old, “out-of-date” data
- Not “peeling the onion” to understand how the numbers were created
- Using market share numbers out-of-context
- Using generic numbers
- Using market share numbers developed using a mix of audited and un-audited numbers
- Confusing growth with market share
- Using market share numbers from the wrong type of analyst
- Not talking to the analysts
SageCircle Technique: The basic recommendation for research consumers is to take everything with a grain of salt. The best tool consumers can utilize for increasing the usefulness of market share numbers is to ask market researchers questions. The following is a checklist of questions to ask market researchers:
- What is your market taxonomy with supporting definitions?
- How did you verify the vendor-supplied numbers?
- Do you footnote whether the numbers came from an audited or unaudited source?
- Do you footnote differences in the definitions of numbers provided by the vendors?
- How do you handle a situation when a vendor does not supply numbers?
- Who collects the data, a senior analyst or a research operations staff?
- If research operations, how was the staff trained?
Bottom Line: As with other types of analyst information, users of market share numbers should strive to be informed consumers of analyst research. The best results are obtained by the having a relationship with the market researcher and using that relationship to obtain insights into the quality of the numbers.
Consumers should be aggressive in challenging analyst positions and asking for background information on how they developed their numbers.
Question: Research consumers – Do you peel the onion with market researcher to understand the underlying models and methodologies? If not, why?
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It should also be pretty obvious that the ‘measure’ is important too (units shipped, product revenue, total solution revenue, licensed seats, deployed seats, number of customers, etc), but it is surprising how often this is omitted, particularly when vendors are quoting market share numbers.
And some of these measures take quite a bit of manipulation to arrive at the final numbers. While counting units shipped is pretty easy to get your head around (with the caveats you mention), market share data based on financial performance can be totally misleading. With some vendors bundling products into suites, some only selling big ticket solutions into very large enterprise, some focusing on the mass commodity market, and the increasing popularity of open source – often all within the same solution category – the poor old analyst has to make all kinds of adjustments and assumptions to get around what is often an apples to oranges to fruit salad comparison.
Lots of the stuff quoted in relation to email servers and database management systems, for example, tells you absolutely nothing about what is really going on out there in terms of commitment, traction, dependency, and leverage. If you believed some of those numbers you would conclude that Lotus Domino is serious mainstream competition for Microsoft and that mySQL doesn’t matter in the database market – despite all the evidence to the contrary.
Against this background, I agree with the recommendation to pick up the phone to the analyst. I was a big buyer of analyst research in a previous life and remember those occasions when you have three sets of numbers spread out on the table in front of you supposedly telling you the same thing, and trying to figure out why they are all so different. I have to admit that a lot of my frustration was more with forecast data, but we usually got to the bottom of things by talking it through with the research houses concerned.
As a final thought, there was an old mariner saying that you should never take two clocks to sea – take one or three. It’s a principle we ended up applying religiously when purchasing market data 🙂
Hi Dale, Thanks for the comment.
Alas, “obvious” is not always obvious so your comment is especially useful. Educating research consumers – whether enterprise IT managers, reporters or tech vendors – helps improve the business value they receive from analyst research which helps the entire ecosystem.