What Is Share Gap?
Share Gap refers to the difference between your current share of a market and your target share. Essentially, it’s the amount of room you have left to grow to reach your target ownership of the market. Additionally, knowing your current and target numbers lets you measure variations in share performance in your markets or products. Tracking various food and beverage industry trends is meaningless if you don’t know how your brand fits in.
How to Calculate Share Gap
Calculating your share gap is simple, but it’s a calculation that is vital for a few others. We’ll go over each calculation, and what to use them for below.
Let’s start with by calculating your share gap.
For this example, let’s assume that you run a small CPG beauty brand. You’ve set a financial goal of 15% market share for your shampoo products this year. Looking at your retail data analytics, you discover that you have 11.5% share. All we need is the formula and to plug in the numbers.
Share Gap = Target Share − Current Share
Share Gap = 15% – 11.5%
Share Gap = 3.5
You have a 3.5 Share Gap between your Shampoo segment and your target share of 15%.
How to Use Share Gap to Calculate Share Gap Opportunity
Knowing your share gap doesn’t just let you know how far you have left to go. It also gives you the opportunity to do a few more important calculations. Most importantly, you’ll want to know your Share Gap Opportunity.
To get this number, you also need to know your Value Per Share point. This is the value in sales each percentage of market share is worth. You can also view this as the value sales of the current share (Brand Value), divided by that segment’s Value Share of Category (Brand Share). We’ll say your current value is $3.5mil.
Let’s plug in some numbers.
Value per Share Point = Brand Value / Brand Share
Value per Share Point = 3,500,000 / 11.5
Value per Share Point = 304,348
Now we use this number and your share gap to determine your Share Gap Opportunity. This is calculated to demonstrate potential incremental value, if you increase your brand share to reach the desired target share.
Share Gap Opportunity = Value per Share Point ✕ Share Gap
Share Gap Opportunity = 304,348 ✕ 3.5
Share Gap Opportunity = 1,065,218
This means you stand to gain $1.065mil if you reach your target market share.
How to Use a Share Gap Analysis
Once you have the numbers in hand from the calculations above, you’ll need to turn those numbers into actions. These numbers can help you understand your current position, but also plan for your future growth.
Here are a few ways to maximize your usage of your share gap analysis.
1. Evaluate Existing Positions
Most CPG brands offer a range of products, and they don’t all perform at the same level. By looking at each category and product individually, you can identify your strongest and at-risk items. This allows you to better determine which products to invest in and which to let go. The more time you waste on underperforming products, the more opportunity you lose to grow your top products. Pair this with understanding the factors that influence the demand of consumer goods and you can streamline product offerings and markets in no time.
2. Plan New Product Launches
Looking to expand into new markets or add to your existing product line? Don’t do it before calculating your share gap. Knowing how to successfully launch new products with data makes a huge difference. If you invest in a new product only to find that your gains in a particular market are minimal, you’ve wasted valuable resources. Try to focus on the markets that offer the best returns and tailor your offerings to them. High share point values offer the strongest opportunity for growth if you plan your product launches accordingly.
3. Avoid Wasting Time and Money
Two of the most important assets a small CPG owner has are their time and money. Wasting either to chase a market that doesn’t offer a strong return only hurts your growth. By calculating share gap and share gap opportunity, you can determine where it’s worth the effort. The broader your product lines get, the more valuable these decisions become. Don’t chase after a market that isn’t worth it.
4. Calculate the Competition’s Market Share
You don’t just want to calculate your own share gap, you want to understand your competition’s. Remember, whenever you gain market share, your competition needs to lose some. By calculating their current ownership and the value it brings them, you can best align your strategies to target weak areas. You don’t want to waste your time and money taking on a thoroughly entrenched competitor.
Turn Data Into Market Share
Understanding your current position and future opportunities hinge on your ability to access up-to-date and accurate data. That’s why it’s vital to understand how CPG data can help your business grow and dedicate a budget to investing a good data platform.
With Byzzer’s reporting solutions, you can have all the data you need at your fingertips. Reach out to our team, so we can help you build a customized paid plan with Byzzer. You can have this data and much more available for any need that may come up.
