Leak #17 Neglecting Market Share Research – Leaking Profits: Article 20

You are not working in a bubble. You have competition in the new home sales arena, and if you don’t do your market share research you are adding to other leaking profits mistakes you may be making along the way.

How do you stack up in your market against your competitors? Market share is the percentage of business (or sales) a company wields, out of the combined total of all companies in a given market (known as “market potential”). You could have a percentage of the single-family homes, luxury homes, or homes built within a specified geographic area, to name just a few.

You should be aware of your market share statistics so that you know how you’re doing in the “big picture”. When you know the market potential, you have a much clearer view of your opportunities. Can you see where you can increase your market share? Setting a target of growing market share is a great way to build your profits!

There are two ways of defining market share:

1. Percent of sales: For example, a small builder sells $6 million in a market that represents a total of $300 million in sales; this company’s market share is 2 percent.

2. Sales units: A builder sells 50 units per year, out of the 1,500 total units sold by all competitors in this region; the company’s market share is 3.3 percent.

Get factual information about closed transactions in Land Transfers and/or MLS.

Compare only to other new home sales—not resales, short sales, and foreclosures.

Pay attention to the Four P’s: Place, Product, Price, and Process.
Develop product and pricing to your actual market, rather than gut feelings or existing plans.

BOTTOM LINE: A great barometer for your success in a specific market is your market share.

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