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Decreasing market share

BCG Bain McKinsey
New answer on Jul 08, 2020
3 Answers
2.4 k Views
Anonymous A asked on Jul 07, 2020


I came across a prompt stating that "our client, a B2B software company has declined decreasing market share. They have an online presence exclusively". Why is this happening and how would we fix it.

I approached it broadly in 2 ways:

a) Market is shrinking -- (size, growth, regs, lifecycle etc.)

b) Our share is shrinking -- (aka customers are going to our competition)

I'm struggling a bit with structuring part b) without making it > 3-4 mins.

I looked at it in the following way so:

i) Customer (price/customer, # of customers, customer mix) -- and provide some suggestions on each

ii) Product (price per product, # of sales, product mix) -- and provide some suggestions on each

And comparing each of these to our competition to isolate where the major difference lies.

I feel some areas I'm missing out are distribution channels etc. which I'm not sure how to include in this format.

Would appreciate any thoughts on how to structure a case where we need to find the cause of market share decline?

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Best answer
replied on Jul 07, 2020
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers


I don't understand point a) at all. The question is "Why is our market share shrinking?". So how can you make a statement that the market is shrinking? This is simply a logically wrong deduction.

On more general terms, this is a nice example why you have to always first align on the definition of your focus metric. You can not just assume something!

"Market Share" is not universally defined. The most common definition is probably "Revenue divided by Market size". But the definition differs by industry. Sometimes it is not about revenue, but about number of customers. Or about volume. Or something completely crazy, like balance sheet size (this is the case in Banking!). So before you start with anything, you have to define your focus metric.

And even if it is Revenue - decline in market share does NOT mean that revenue is decreasing! It means that the numerator (Revenue) becomes smaller RELATIVE to the denominator. So you can also lose market share with growing revenue - if the market grows faster.

Thereby, you first need to understand which situation prevails. If market share is measured by revenue:

  • Is our revenue growing slower than the market? Or is our revenue actually shrinking?

Once we have clearness on this, we can outline our full structure. There are two overarching steps.

Step 1: Diagnostic (understand what has happened that has caused the market share decline, and why it has happened)

Step 2: Outline of strategic measures (what can we do to address the specific reasons identified in Step 1?)

Starting the Diagnostic means that we have to explore revenue in terms of why we are underperforming relative to our peers.

  1. Firstly we disaggregate revenue into its conceptual drivers: Price and Volume.
  2. Then we check, what is the numerical driver of the market share loss: are we underperforming in terms of pricing, or are we underperforming in terms of volume sold
  3. Once we know what causes the problem on the first level, we dig deeper. So if, for example, we are underperforming in terms of volume, we have to ask ourself "What determines the volume sold?". Or in other words, what is important to customers? And how strong are we regarding these customer-relevant aspects compared to our competitors? (for example, if there is an increasing need for post-sales support services --> how good are we in providing this?). The result of this assessment gives us a clear view on where our pain point lies. This marks the of the overarching Step 1 (Diagnostic)
  4. Once we understand the pain point(s), we can start to outline specific solution ideas to address these very pain points (and only these pain points!). This is the overarching Step 2.

I hope this helps.

Cheers, Sidi

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Anonymous replied on Jul 08, 2020


I have seen numerous candidates develope BS frameworks on this. And here is why:

45% of candidates develop quantitative structures and fail. This is because these structures do not help to isolate a problem when it affects both number of clients and their spending simultaneously.

Another 45% of candidates will use Cheng structures like Clients, Company, Competitors. It does not help to isolate the problem again because the problem affects all drivers simultaneously. Your clients changed their preferences, your company has not reacted on this and your competitors have reacted.

Now what do the winning 10% of candidates do?

  1. Understand, that if you lose market share then clients think that your competitor is better at something
  2. Understand, that the only way to find out why clients think that competitors are better is to compare your company vs competitors
  3. Understand, that you need to be MECE to find the problem and the best way to be MECE in this case is to compare your company’s client journey vs competitor’s client journey

That’s it. Simple and clear.



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Content Creator
replied on Jul 08, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut


When they tell you that market share is shrinking, this has nothing to do with the size of fluctuations of the market itself.

Hence, your option a is out of the picture. You should focus only on what is making your portion of the cake be smaller than it used to, not the cake itself.

Hope it helps!



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