Assessing share risk
Share risk is the risk that the strategy will not create the degree of customer preference or competitive advantage that is needed to create the planned market share and hence fall short of creating shareholder value. It is distinct from, but aggregates with, market risk and profit risk. In short, share risk arises when what is offered to customers is not, in their eyes, valuable enough to them. This happens for a number of reasons: the wrong customers are targeted, they are offered the wrong things, or the strategy involves going head-on with a bigger, stronger competitor.
Share risk is the cumulative risk of five component risks:
- Target market risk. This is the risk that the value proposition will appeal only to a minority of the customers targeted; it is low when each target segment is homogeneous in its needs and high when each segment is heterogeneous in what it seeks.
- Proposition risk. This is the risk that the value proposition will not be quite right for any of the customers targeted; it is low when the strategy involves making specific offers to each target segment and high when the strategy involves a single offer to the whole of a segmented market.
- SWOT risk. This is the risk that the strategy does not make use of the company's strengths and does not compensate for its weaknesses; it is low when the targeting reflects the distinctive competencies of the company and high when it fails to understand them.
- Uniqueness risk. This is the ...