Increasing market share is one of the most frequently cited business objectives, as it is assumed that more market share also leads to higher profitability. On the one hand, our study theoretically examines this relationship, which has changed due to globalization and the digitization of the economy; on the other hand, we carry out an empirical meta-analysis in which we evaluate almost 90 studies on the relationship between market share and profitability over 45 years - covering all relevant industries and continents. Based on over 800 identified effects, we find that financial performance only increases by an average of 0.13 percent if market share increases by one percent. This result is surprisingly low and above all significantly lower than the influence of customer relationships (six times stronger) and brands (three times stronger). We also find that the relationship between market share and profitability is highly context dependent (e.g. by region, industry, market maturity). Companies should therefore question the focus on market share as a key performance indicator (KPI) and adjust its use as a strategic metric in a differentiated manner depending on the specific conditions the company is facing.

1. From:
Market share should not be used
excessively as a metric
Customer and brand metrics have a much
stronger financial performance impact
Edeling, Alexander and Alexander Himme (2018)

2. From:From:
 863 elasticities (i.e., % change in financial performance for a
1% change in market share) from 89 published studies
 Studies were published between the years 1972 and 2017,
come from six different continents, and deal with a wide
range of manufacturing and service industries
Analyzing the market share–
financial performance relationship
Edeling, Alexander and Alexander Himme (2018)

3. From:From:
Average market share elasticity vs.
customer and brand elasticities
Edeling, Alexander and Alexander Himme (2018)
%-increase in
financial performance
(firm profits, firm market value)
Firm customer-related assets
(e.g., customer satisfaction)
Firm brand-related assets
(e.g., brand image, brand
awareness)
Firm market share
1%-increase in…
0.13
leads to…
0.33
0.72

4. From:From:
Reasons for low performance
relevance of market share
Edeling, Alexander and Alexander Himme (2018)
Global
reasons
• Digitization
• Globalization
Customer-specific
reasons
• Loss of exclusivity
• Negative network
effects
Firm-specific
reasons
• Slow processes
• Excessive
competitor
orientation
• Motivation
problems for the
market leader

5. From:From:
Implications for usage of market
share as key performance indicator
Edeling, Alexander and Alexander Himme (2018)
Objectives
Customer and brand-related metrics should be included in dashboards as well as in
employee communication and incentives
Adaptation to specific situations
Firms should use market share differently in different contexts (more important in emerging
markets and for manufacturing companies)
Budgeting
Spend about 60% of the marketing budget on building customer relationships, 30% on
developing strong brands, and only 10% on increasing market share