How Distribution Drives Market Share

Product & Brand ManagementWilbur, K. C.; Farris, P. W. (2014) · 2014Journal of Retailing
Topicsdistribution·market share·double jeopardy·cpg·acv·new product launch·sku

Your team brings you a plan for a new product, with an optimistic distribution target and a market share forecast to match. Approving it commits retailer fees before anyone knows whether those numbers are realistic. How do you check them before you sign off?

Products with wider distribution hold more market share per point of distribution.

Data chart

Most categories show faster-rising share at wider distribution

Number of the 37 product categories, by how market share rises across products with wider distribution: faster and faster, roughly in step, or more and more slowly.

333Share rises faster — 33Share rises roughly in step — 3Share rises more slowly — 1
  • Most categories show disproportionately more share at wider distribution.

Products with wider distribution hold disproportionately more market share in most categories, with four exceptions.

Counts from manuscript p. 10 and Table 3 (p. 23), 2003-2005: 33 categories with faster-rising share, 3 approximately in step (Diapers, Men's Fragrances, Toothbrushes), 1 with slower-rising share (Laxatives). The manuscript's printed percentage disagrees with its count; this chart uses counts.

Data chart

Faster-rising share is most common within leading brands

Number of the 37 product categories in which products within a brand show faster-rising market share at wider distribution, by the brand's rank in category market share.

Brand rank 1 categories34Brand rank 2 categories28Brand rank 3 categories28Brand rank 4 categories22Brand rank 5 categories26Brand rank 6 categories22Brand rank 7 categories14Brand rank 8 categories14Brand rank 9 categories9
  • The pattern appears within leading brands in 34 of 37 categories.

Products within leading brands most often show disproportionately more share at wider distribution. The pattern is less common at lower brand ranks.

Table 6 (manuscript p. 26), 2003-2005. Each count includes categories where the brand at that rank has a statistically reliable faster-rising relationship across its products at the 95% confidence level. An uncounted category does not establish a straight relationship. Counts replace the manuscript's inconsistent percentages.

Action guide

  1. Add a distribution and share check to every new-product gate.Have your team compare the plan's distribution and market share with your brand's existing products and check that it fits their pattern. A large mismatch is a reason to recheck the assumptions, not a forecast of launch performance.
  2. Require an independent review before approving distribution assumptions.Have a central reviewer outside the launch team record whether the assumptions fit the existing pattern before you commit retailer fees. Design the check so it does not slow launches.
  3. Check launch assumptions against your own category's pattern.Give that pattern more weight in higher-revenue or more concentrated categories, where it is stronger.
  4. Challenge the assumptions for a leading brand's smaller products.Compare those assumptions with the brand's pattern. Do not use the pattern alone to prune or reposition the products.
  5. Review a flagged product's distribution after launch.If you launch despite a mismatch, compare the distribution it actually reaches with what the plan assumed.

Evidence

  • In 33 of 37 categories, more widely distributed products hold disproportionately more market share.
  • Inside a leading brand's own line, products with less market share also hold less share per point of distribution.
  • The pattern is stronger in higher-revenue and more concentrated categories, and in beauty and personal care.
  • About 29% of the new products launched in 2004 had failed completely by year-end, against 32% for category-leading brands.
  • For top-three brands launching at least eight new products, the pattern across a brand's existing products usually predicted new products' share reasonably well. Every miss came from new products doing worse than the pattern.

Key takeaway

The distribution and share pattern of a brand's existing products is a useful check on a new product's plan.

Limitations

The study covers US grocery, drug and mass-market packaged goods from 2003-2005, excluding Wal-Mart, club, convenience, vending and private-label products. It measures associations, not profit or the gains from adding distribution.

Source

Wilbur, K. C., & Farris, P. W. (2014). Distribution and market share. Journal of Retailing, 90(2), 154–167. https://doi.org/10.1016/j.jretai.2013.08.003

Exact values behind the rounded figures: 29.3% of new products launched in 2004 failed completely by year-end.

Read the paper ↗