From 1962 to 2012, AVIS had the tagline, “We Try Harder.” As #2 in the car rental business, they had to try harder in order to compete with #1, the mighty Hertz.  

The problem with being #1 in a market is that you tend to float up and down with the market, because you ARE the market -- you’re likely already active in each and every one of its sub-segments.  We recently compared how oilfield service companies performed over the 12 year period from 2006 to 2017 – a period that includes two complete business cycles. Using our Oilfield Market Report, we looked at how the market shares of the #1 service company in 2006 had changed by 2017.  Then we looked at the market shares of the #2 company in 2006 versus 2017. And we made this comparison across twenty product service categories – drilling bits, artificial lift, directional drilling, hydraulic fracturing, production testing…

Here's what we discovered: We would much rather have been #2 in 2006 than #1.

Of the oilfield service companies who held the #1 market position in 2006, 55% lost market share, 35% held on to market share, and only 10% gained market share by 2017. In other words, 90% either lost market share or just sustained their market share over a 12 year period.

“How did the #2 companies do?,” you ask.

Of the companies who held the #2 market position in 2006, 30% lost market share, 20% held on to market share, and 50% gained market share by 2017.  That’s right… half of them gained share over that same 12 year period.

Okay, does the trend extend to the rest of the market? How did the #3 companies perform?

Randomly. More lost share than gained share, but those who gained share gained a LOT of share.  

#2 companies have many advantages. First, you have more targets of opportunity – there are sub-segments and geo-markets that ,as #2, you probably aren’t in now and could move into.  Also, operators like to have a strong #2 as a rival to keep #1 on its toes; they’ll give you their business in order to promote competition. Finally, competitor #1 may be employing a portfolio investment approach and milking his cash cows to fund start-ups in emerging markets, thus bleeding market share by putting his operations on a strict capex diet.     

Why don’t the #3s fare as well as the #2s? While customers like a strong #2, they may not see the need for a strong #3 to promote competition. Also, the oilfield market in many non-North American countries is too small to support more than 1 or 2 vendors profitably across the business cycle, so a strong #3 struggles to emerge.      

If you are a #1, here are some tips on how you might protect yourself. If your customers won’t let you take share in your segment, then your options are threefold: (1) enter other markets where you can gain share, (2) expand your current market (by adding services, etc.), and (3) make sure your operations get the funds they need to defend their position in the market.

Moral of the story? We all want to be #1, but in the oilfield that generally has meant indifferent market share history.  If its growth you want, bet on #2.