The 15-30 Rule of Market Share and Profitability

Empirical studies from firms like General Electric and the Boston Consulting Group have revealed a strong correlation between market share and profitability. This can be summarized as a general rule:

Companies with greater than 30% market share are almost always profitable.
Companies with less than 15% market share almost always lose money.

Implications of the Rule:

Dominance is Not Optional: Achieving a commanding position in a market is essential for long-term, sustainable profitability. Simply being a minor player is a recipe for financial drain.
Limited Number of Winners: Any given market can only support a few (typically two or three) consistently profitable suppliers. There isn't room for six companies to each have a 15%+ share.
The Necessity of Segmentation: This rule underscores why market segmentation is not just a tactic, but a strategic necessity. If you cannot achieve a dominant share of the broad market, you must define a smaller segment where you can achieve it.

This rule provides a clear, quantitative justification for The Strategic Principle of Marketing. The goal is not just to compete, but to win a share of the market that is large enough to ensure profitability.