How to predict losers and winners in market share battles

More than ten years ago I predicted that Mitsubishi and Ford would fall on hard times and that Toyota would rise to dominance over Holden, despite the GMH stranglehold of the profitable middle market with the New Commodore. I predicted the movement in the market based upon brand dimensions as measured by an ingenious device called the "Quality of Sales Index" (invented by my friend and colleague Constant Behrens).

What do we mean by "the quality of a sale"? One sale can look much like another, but the difference in quality when you look underneath can be spectacular. Sale A might be the fourth such purchase of the brand, not prompted by a promotion, and likely to have bought accessories from the dealer, where the buyer will have all services done. Sale B might be the first (and only) time the buyer has chosen the brand, bought on price, responded to a promotion, and gets cheap accessories from Backyard Barry's where he gets his service done. (A bit of database analysis would tell you this.) Buyer A's transaction added to the brand equity of the company and Buyer B's did the reverse. If you have a high proportion of Buyer As, the chances are your sales figures will grow. If you have a high proportion of Bs, the reverse is the case.

When Constant and I allowed Toyota's research agency to run the Quality of Sales Index analysis on a mixed group of automotive buyers, the result was Holden No 1, Toyota a close No. 2. Ford was a good distance away at No.3. And Mitsubishi was a sorry last at No.4. We have 2 questions we ask to reveal a person's brand-attachment or brand-engagement. Once you know the concentration levels (on the Quality of Sales Index), you can determine which brands were in trouble - no matter what the market share data says. It says which direction sales are likely to go. On the basis of this one test, I predicted that Toyota would surplant Holden as the "Aussie" brand sometime in the next 5 years.

Let's look at the sales data over the period between when we made the assessment and now. In 1997, Ford at 18% was No. 1 in sales for its 3rd consecutive year. Toyota was No. 2 with 17.5%. and Holden No. 3 with 17.1%. Mitsubishi with 11.9% came in at No.4. But the QOS Index had them in this order: Holden, Toyota, Ford and Mitsubishi.

So what happened? Ford slipped from 21.5% in 1995 to 11.9% in 2006. A severe collapse, and all driven by lack of connection between its brand and its buyers. While the Ford execs were celebrating '97's results (18%), the undertakers were measuring them up. Mitsubishi had a shorter distance to fall from '97 (11.9%) to 2006 (6%), but nearly halving your market share is no mean feat. Mitsubishi buyers are not offered a brand, just a deal. (Both Mitsubishi and Ford hired ex-Toyota execs hoping some of the magic would rub off. It didn't.)

Holden's market share from the 1997 figure of 17% rose to 27.5% in 2000 on the back of the New Commodore. But, as predicted, the brand connections were unravelling and it fell to to 15.2% in 2006. From March 2003, it lost the leader's jacket to Toyota which collected 22.2% market share in 2006. It is expected to repeat the performance in 2007.

What lessons are there in this meander through the past? What fools we were not to offer this analysis tool to the endangered brands. (Toyota never paid us a cent for the exercise). What fools we were not to offer it to brands in other categories. It's like a crystal ball. And it identifies the problem for the forthcoming fall from grace. The most important lesson is about brand attachment and engagement. Without it you're going nowhere. And how do you build brand attachment? One person at a time.