Market Share or Profit. Which Would You Choose?

posted in: Marketing | 0

I recently read (Tech Crunch, November 11, 2009) that Apple earned 1.6 billion (US)  profit in the last quarter from their iPhone sales, passing market leader Nokia. Nokia earned 1.1 billion (US).  I guess that came as no big surprise considering all the hype that you hear about the iPhone.  I admit, I jumped on the bandwagon, and frankly I love my iPhone, and the support I have gotten from Apple has been great.  I have had several Nokia phone, and while I was alway quite satisfied with them, love was never a tern I associated with my cell phone.

The real surprise came when I read more of the story.  Nokia is still the big leader in Market Share with about 35% of the global market, while Apple has a puny 2.5% share.  But despite Nokias huge market share, Apple made more money.

Sure, its easy to explain.  Nokia sells lots of low cost phones, and their margins are quite tight since they have lots of competitors with similar products.  Apple’s iPhone is expensive, and they have relatively few competitors and a pretty unique product.

This is a pretty extreme example, but we can still learn from it.  Given a choice (and hey, I know we are not always given a choice), we will likely be more successful (that is more profitable) at the higher end of the market.  Look for better products, unique products, and sell on features rather than price.  And look at your own organization.  Do you offer fantastic service and top notch after sales support?  Do your customers find and working with you just satisfactory?  Or do they love your products and find working with you to be a pleasure?

Don’t get me wrong.  Sometimes there are compelling reasons for going after market share.  You may be trying to solidify your relationship with a vendor.  Maybe you can get a better discount if you sell a larger volume.  Or maybe you need the volume for economy of scale in your own organization.

Just think twice (I would suggest more that twice) before you get down and dirty with heavy discounting just to build volume.  Remember, customers that you can win on price, are just as easy to lose on price.  You competitors will find it much harder to steal customers who love you, love your people, love your products, and love your service!

Do you need help defining your unique value set?  Do your sales people need coaching on how to sell on value rather than on price?  Give us a call to set up a free needs assessment.  We can help.