UCLA

This chapter describes that three basic principles motivate the specification of the market-share models. Market-share models should be competitive, descriptive as well as predictive, and profit-oriented. Being fundamentally competitive implies that one cannot know the effect or effectiveness of a marketing action without accounting for the actions of competitors. Market-share models are models for understanding how the marketing efforts of every brand impact the results in a competitive marketplace. Only by describing the influence of each marketing instrument can one gain a basis for marketing planning. Prediction alone is not enough. Time-series models that forecast the future from the past sales provide no insight into how sales are generated. The emphasis on being descriptive also embraces the need to understand the areas in which consumer choice probabilities are synonymous with market shares as well. Part of the goal of description transcends what can be done by market-share models alone. Managers need to understand that their efforts have (potentially) competitive effects and (potentially) market-expansive effects. In sales-response models these effects are comingled, but by combining descriptive market-share models for the competitive effects with descriptive category-volume models for the market-expansive effects, managers obtain a much richer understanding of the market. The profit-oriented goal of market-share analysis urges us to ask how the firm's allocations of resources to aspects of the marketing mix produce bottom-line results. © 1993, Elsevier Science Publishers B.V. All rights reserved.