When you’re working to grow your business, you often think about market share. You know you’ve got competition going after the same potential clients you’re trying to win. You work on your product or service. You pay close attention to your marketing. You’re on top of customer service. And still, it sometimes it feels like you’re beating your head against the wall trying to get a bigger piece of the pie.
Maybe the problem isn’t just with your business. Maybe the problem is with the pie! Maybe what you should be focused on is not getting a bigger piece of the pie, but on finding a completely different pie. Is it better to have a bigger piece of a pie that’s less profitable or to have a piece of a more profitable pie?
Let’s save the pies for dessert and talk about business markets. We tend to think that bigger is better. But having a smaller segment of a more profitable market can actually put you miles ahead. Here’s a classic example.
Not all that long ago (2007 to be exact), Dell manufactured more personal computers than anyone else in the world. And they didn’t just make them—they sold them. At that time they owned approximately 30 percent of the market in the United States. Apple, on the other hand, owned a paltry 6.3 percent of that space. Obviously, Dell was kicking Apple’s business butt, right?
When it came to the share of the market, Dell was the clear winner. But when it came to dollars and sense, the tables were dramatically turned. Dell earned just shy of $3 million in profit on their 30 percent market share, while Apple’s puny 6.3 percent of market share earned them $818 million in profits. Which bank account would you rather have?
The point of this little illustration isn’t whether Dell or Apple is better—or even if one has a better business plan than the other. What I’m trying to illustrate is that business growth and the share of the market you won doesn’t always measure your business success. You don’t have to be the biggest to be successful.
As you review (and possibly revise) your business plans, you may want to consider if there is a subset of the market you can serve more profitably—instead of trying to gain a bigger share of that market share. This is particularly important if you find yourself increasingly competing on price. So ask yourself: “Bigger or more profitable?”
Excuse me, while I go grab a nice piece of apple pie!