A company’s market share is the percentage it controls of the total market for its products and services. Market share is an essential metric for businesses because it’s an indicator of a company’s profitability and success. It can signal dominance in an industry and how well a company’s revenue-generating efforts are working to achieve business goals. Show
Market share can affect operations, pricing of products and services, and, potentially stock market performance. A growing market share corresponds to growing revenue. That, in turn, means a business can scale up its operations and opportunity for greater profitability. To gain market share should be a serious business goal. There are a number of strategies a company can put to work to increase market share. These include improving innovation, building and solidifying customer loyalty, employing a talented, dedicated workforce, acquiring other companies, deploying effective advertising, and pricing products and services efficiently. Key Takeaways
How Can Companies Increase Market Share?Understanding the Benefits of Market ShareMarket share is calculated by measuring the percentage of sales or percentage of units a company has in the overall market. Using the percentage of sales method, if a company has $1 million in annual sales and the total sales for the year in its industry are $100 million, the company’s market share is 1%. Under the percentage of units method, a company that sells 50,000 units annually in an industry where 5 million units are sold per year also has a market share of 1%. A higher market share places companies at a competitive advantage:
TipUsing sales, the formula to determine market share for a specific period of time is (total company revenue/total market revenue) x 100. Using units sold, the formula is (total number of units sold by company/total number of units sold in the industry)/100. How to Gain Market Share The importance of market share lies not simply in maintaining your company’s current share of the market. After all, as the industry grows, a company’s market share must grow as well to stay competitive and profitable. Increasing market share is crucial and involves gaining a bigger
share than you have already. That would indicate that your growth is greater than average and you’re outperforming your competition. Here are some areas a company can focus on to increase market share. InnovationInnovation that attracts customers can come in different forms. One is useful, new technology that a company develops, introduces, and continues to improve before competitors gain a foothold. Consumers excited about the technology buy it, use it, and can become repeat customers. Innovative technology can build a company’s customer base with consumers new to the industry as well as consumers who leave another company for it. A few other ideas for innovating to gain market share can include product innovation, production method improvements, and marketing strategies. The potential for high-value innovation exists throughout a company. Customer LoyaltyBuilding and reinforcing relationships with existing customers by cultivating their loyalty is a smart strategy to gain market share. First of all, existing customer loyalty can help prevent customers from leaving a company for others when new products come to market. What’s more, a company can broaden its base with the word-of-mouth marketing so often provided by satisfied, happy customers. Take advantage of chances to engage with customers who desire a closer connection and to deepen their positive experience. An added benefit is that this organic opportunity to welcome new customers and increase market share often can come without specifically related increases in a company’s marketing costs. Plus, loyal customers can sometimes share ideas for innovations to the products they love. Skilled Workforce A company that focuses on attracting and keeping talented employees is focused on increasing its market share. That’s because skilled employees can become dedicated employees. That, in turn, can cut expenses related to
hiring and training. Plus, a skilled workforce that excels at its tasks can allow a company to maintain its focus on producing exceptional products and sales. Attracting the best requires competitive salaries and a strong selection of benefits, including options for flexible work schedules and relaxed office settings. Acquisitions To win market share and dominate an industry, a company can consider buying its
competition. Such a move actually offers multiple strategies to increase market share in one action. With an acquisition, a company takes a competitor out of the market and assumes its market share. It captures its customer loyalty. Moreover, it can put products, services, and other strategic opportunities already developed by
its acquisition to work immediately. If a company can’t buy another due to financial constraints, it can consider acquiring key employees to improve its own workforce and for the customer loyalty connected to those employees. Advertising Effective, frequent advertising offers a good opportunity to gain market share. Innovative branding and marketing through advertising can garner the attention of consumers,
build connections with existing customers, and spur widespread desire for the products and services a company offers. High-impact advertising in different forms can help buyers understand and align with a company. No matter which advertising media is used, it’s wise to maintain continuity across design, voice, and message to ensure a strong, positive, and lasting impression. Companies should also make sure that their advertising actually
targets the right market segment for their products and services. Price Reductions Lowering prices is a solid strategy to help a company win market share. Lower, more attractive prices can attract consumer attention and loyalty.
That can increase the all-important sales that drive market share higher. In addition to decreasing the actual price for products, a company can consider promotions, coupons, bonus items, and other customer benefits. For instance, incentives such as referral programs and free shipping can generate extra interest and added sales. How Can I Improve My Market Position?One way a company can increase its market share is by improving the way its
target market perceives it. This kind of positioning requires clear, sensible communications that impress upon existing and potential customers the identity, vision, and desirability of a company and its products. In addition, you must separate your company from the competition. As you plan such communications, consider these guidelines:
How Can I Attract New Customers?One way to win market share is to win
new customers. A company can increase its customer base in a variety of ways. Here are a few to consider:
How Can I Prevent Loss of Market Share?To avoid losing its market share, a company should monitor its market share metric, keep an eye on the performance of its competitors, and take steps to improve the aspects of its business that can affect its market share standing. These can include things like product and service quality and pricing, customer satisfaction, the growth of its customer base, marketing, and advertising, the quality of its staff, and the potential for the acquisition of competing companies. The Bottom Line Increasing market share can be vitally important to the financial health and
continued success of a business. A company has a number of opportunities at hand to, not just maintain, but gain market share. Every company should understand the value a strong market share offers and commit to the ongoing effort that it can take to build it. Which of the following types of promotion is usually the least expensive for a company?Publicity is one of the most effective and least costly means of promotion. 3) Sales promotion – Sales promotion includes all forms of communication not found in advertising, publicity and personal selling.
Which if the following is one of the main things to consider when evaluating a business opportunity?One of the most important factors when evaluating a business opportunity is market size. Do a little market research. Figure out if there is a market for the opportunity — and how big that market is. Before you move forward, you want to be sure the demand is there.
What do fear based marketing messages in advertisements focus on?Fear appeal advertising is based on a persuasive message that emphasizes the potential dangers and harm that will befall individuals (in this case, the audience) if they do not adopt the messages' [or adverts] recommendations.
What occurs when a company can significantly increase its market share by being first with a new competitive advantage?- When an organization is the first to market with a competitive advantage, it gains a first-mover advantage. The first-mover advantage occurs when an organization can significantly impact its market share by being first to market with a competitive advantage.
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