By Leen Nsouli, Office Supplies Industry Analyst
This how-to on dollar share impact will break down retail data measures for the math-averse. Whether you’re just getting started, or if this isn’t your typical area of focus—this is for you.
Bet Your Bottom Dollar
Let’s talk numbers. If you’re a market researcher, one measure that will prove handy in tracking your business, brand, or category is dollar share impact.We’ll get into the specifics of what that means in a moment, but first—here’s why you should care about dollar share impact. Whether you’re deep in the data trenches or sitting around the board room table, it’ll answer questions like these:
- What does a gain or loss in share points (at the business, category, or brand level) translate to in dollars?
- Which factors drive total business up or down, and what contributes most to this increase or decrease in dollar share?
- How can we shed light on the opportunities available to our business, and where should we invest resources?
Here’s a fun example to put it into real-life terms for you:
Pencil World, a giant retailer of—you guessed it—pencils, raked in sales of $22 million last year, in a market that sold $110 million in pencils. (Now that’s a lot of pencils!) Let’s calculate how much a change in Pencil World’s market share from 2013 to 2014 equates to in dollars.
Here are some measures we’ll need in our pencil box to crunch the numbers:
- Current and previous time period dollar share
- Total dollar sales for the current period
- Dollar share point loss or gain
- Value of 1 share point
If you’re thinking, “I’m not sure what that means”—relax. We’ll break it down for you.
- First, let’s calculate Pencil World’s market dollar share for 2013:
In 2013, Pencil World enjoyed sales of $25 million in a market that sold $100 million.
Pencil World’s 2013 market dollar share was 25%.
- Now we’ll do the same dollar share calculations as above, but for 2014:
In 2014, Pencil World had sales of $22 million in a market that sold $110 million.
Pencil World’s 2014 market dollar share was 20%.
- Next, calculate how many market share points Pencil World lost from 2013-2014:
To do this, we use this formula:
So, Pencil World lost 5 market share points from 2013 to 2014.
- Almost there! Next, determine the value of 1 share point:
To do this, we divide total current period (2014) sales by 100 points.
So, 1 share point is worth $1.1 million.
- Finally, calculate the dollar share impact:
To determine the total dollar share impact of the 5 percentage-point loss, multiply the 5-point loss by the dollar value of 1 point.
Say it with me now! After a 5 percentage-point loss in market share from 2013 to 2014,
Pencil World experienced a negative dollar share impact of $5.5 million.
Let’s review:
When you want to determine who contributed to total dollar share losses or gains or help your business identify where to invest resources, now you know how to calculate share impact. You can apply the same concept to any category, brand, or item!
Any questions? Contact The NPD Group at 866-444-1411 or email contactnpd@npd.com.
