Startups and established companies alike measure success using a variety of metrics. One of the most popular, of course, is market share. And for good reason: if you control a large chunk of a particular market, it would seem that you’re doing something right. And there’s the fact that impressive-sounding market share figures make for great PR fluff.
But is market share all that it’s cracked up to be? According to an interesting analysis of the mobile phone market conducted by Asymco, the answer might just be ‘no.‘
In comparing market share, sales and profit figures for the top eight mobile phone vendors, Asymco has quantified an interesting fact: Apple controls less than 5% of the market, but has over half of the profit.
The global popularity of the world’s most recognizable smart phone — the iPhone — is, of course, responsible for this interesting situation. Few companies, of course, particularly those in large, competitive markets, can claim to have an iPhone-like hit. But that doesn’t mean that Apple’s market share versus profit share figures don’t offer a lesson. They do.
That lesson: it’s not how much of the pie you control, it’s which part of the pie you control. Some slices are more filling than others, and companies can beat out the competition even if the competition controls a larger portion of the market.
For companies selling products, like Apple, building the right products can be better than building high-volume products. For service providers, having the right clients can be better than having more clients.
All of this, of course, is common sense. But common sense isn’t always so common. Market share is still a popular metric from the C-suite down to the marketing department, and companies often place heavy emphasis on acquiring as much market share as possible.
In reality, Apple shows us that aspiring to control the most profitable segments of a market is often a more fruitful approach, even if it’s far more challenging.