Market Share: 30% is the Magic Number

August 4th, 2009 by

By Pat Hinds
I have been following the recent Yahoo and Microsoft agreement regarding sharing search engine technology; this agreement will allow Microsoft to own 30% of the search engine traffic after the deal is complete. I found an interesting blog in the NY Times entitled, Behind Microsoft-Yahoo: The Online Economics of Scale that explains the importance Microsoft puts on owning 30% of market share in a specific product category. Mr. Ballmer, the Microsoft CEO, said during the conference call that in Internet search, “scale drives knowledge, which, in turn, fuels innovation.” The article gives the example of 1996 when Microsoft’s goal in catching Netscape was to move from about 5 percent to 30 percent share of the browser market within a year. “The view inside Microsoft was that until you got to 30 percent, you weren’t credible in that market with business partners and developers.”

After seeing the reference of how important 30% market share was to Microsoft, I went to the web to see if I could find any other companies that found 30% market an important milestone. The following is a few results of that search:

Advanced Micro Devices (AMD)
Speaking to investors at the Morgan Stanley Technology Conference in San Francisco, Hector Ruiz, chief executive of AMD, said chipmaker would not meet its first-quarter sales guidance of between $1.6 billion and $1.7 billion, according to report by Forbes. However, Mr. Ruiz reiterated his company’s long-term goal to own 30% of the market “to break the monopoly.”

Xerox
Document management company, Xerox India is eyeing a 30 per cent market share from 11 per cent in the PPP (Print Per Minute) copier category this year.” For us achieving a leadership position is to have 30 per cent market share by this year,” Xerox India Director (Office Business) Princy Bhatnagar told PTI in Chennai.

Ford
According tot he Financial Times (June 23, 2000), Ford India planned an aggressive marketing scheme to attempt to command 30 percent market share in the country’s upper-end car segment. The company targeted sales of 22,600 units this year. Ford India Vice-President of Marketing, John Fink conveyed.

It is obvious that Microsoft is not the only company that feels that 30% market share is the number required to be “credible” in a market segment. In the current economic environment where the size of the economy has changed rapidly it is key that companies understand the size of the target market, know what market share they own in a target market, and execute a plan that allows them to either capture 30% of the market (or maintain the status of own greater than 30% of the market).

http://bits.blogs.nytimes.com/2009/07/30/behind-the-microsoft-yahoo-deal-the-internet-economics-of-scale/

Topics: Sales Consulting