The relationship between distribution and market share

This paper develops an aggregate-level model of distribution and market share for frequently purchased, branded consumer goods that is founded in the concepts of ‘push’ and ‘pull’. The model makes a key distinction between uncompromised and compromised demand as sources of market share. Uncompromised demand is demand that is satisfied when the preferred brand is found; compromised demand results from brands that lack broad distribution and whose potential customers are willing to compromise and purchase another brand when the preferred brand is not present. Trade behavior is also addressed by analyzing the effects of consumer demand ‘feed-back’ on the trade’s decision to stock and merchandise the brand. Compromised demand and feedback effects may be critical, and often overlooked, determinants of market share. Under a variety of model assumptions, analytical results are consistent with longitudinal and cross-sectional evidence that market share is a convex function of distribution, increasing at an increasing rate up to 100 percent distribution. In addition to these insights, the authors believe that the model has promise for future normative work on balancing push and pull marketing effects.