What is market share as far as business is concerned?
In today’s highly competitive business landscape, market share is a crucial metric for any company that wants to succeed.
But what exactly is market share, and why is it so important?
In this article, let’s dive deep into the concept of market share; explore its significance in the business world.
Moving forward, you will discover various strategies companies use to gain, increase, and maintain their market shares.
What Are Market Shares? – What Is Market Shares in Business
Market shares are the percentage of total sales a company has in a particular market.
It is a measure of a company’s relative position within an industry and is often used to compare its performance with that of its competitors.
A company with a high market share is said to have a dominant position in the market and is likely to have more pricing power.
Also, they have a greater ability to influence industry trends.
Types of Market Shares – What Is Market Share in Business
There are several types of market share, they include:
Total Market Share
Clearly speaking, total market share is the percentage of total sales a company has in a particular market.
It is calculated by dividing the company’s total sales by the total sales of the entire market.
For example, if a company has total sales of $10 million and the total market size is $100 million, the company’s total market share is 10%.
It gives an overall picture of a company’s market position compared to its competitors.
Segment Market Share – What Is Market Share in Business
This market share type refers to the percentage of total sales a company has in a specific market segment, such as a geographic region or particular product category.
It is important to measure market share by segment because it gives a clear understanding of a company’s position in a specific area of the market.
More so, the company can focus on those segments where they have a strong position or those with a high growth potential.
Relative Market Share
Going further, relative market share compares a company’s market share to that of its competitors in the same market.
It is calculated by dividing the company’s total market share by the total market share of its closest competitor.
A company with a relative market share of 2 has twice the market share of its closest competitor.
Thereby giving a company an understanding of how much smaller or larger its market share is compared to its closest competitor.
Absolute Market Share – What Is Market Share in Business
This is the raw number of units or dollars of sales a company has in a particular market.
Absolute market share is calculated by multiplying the total market share by the total market size.
For instance, if a company has a total market share of 10% market share of $100 million, the absolute market share is $10 million.
It gives a company an understanding of the size of its market share.
Dollar Market Share
This refers to the percentage of total revenue generated in a particular market that a company has.
It’s important to measure dollar market share when the market is focused on dollar sales rather than unit sales.
Niche Market Share – What Is Market Share in Business
Niche market shares are all about the percentage of total sales a company has in a small, specialized market.
It is crucial to measure niche market share when a company is operating in a small but specialized market where the total market size is limited, but the profit potential is high.
Global Market Share
Last but not least on the list is the Global Market Share- it is the percentage of total sales a company has in a global market across all countries.
For more productivity, you should measure global market shares when your company is operating in a global market and wants to understand its position in the global market.
Importance of Market Share in Business – What Is Market Share in Business
In fact, market share is important for business because it can indicate a company’s relative position in the market and its overall performance.
So, having a large market share can be beneficial for several reasons, such as;
Revenue and Profitability
Firstly, companies with a large market share can generate more revenue and have higher profitability.
This is because they can sell more products or services at higher prices.
Ultimately, this can increase their cash flow which can be used to invest in further growth and expansion.
Economies of Scale – What is Market Share in Business
Secondly, when your company has a significant market share, you can benefit from economies of scale.
Speaking of this, Economies of scale refer to the cost savings that occur as the volume of production increases.
This can result in lower production costs and higher profit margins.
Brand Recognition
Furthermore, companies with a large market share often have more visibility and are more recognizable to consumers.
As a result, it can lead to increased brand loyalty.
Also, it can make it more difficult for competitors to enter the market as they will need to invest more in marketing and advertising to build brand awareness.
Bargaining Power – What Is Market Share in Business
In case you don’t know, you may have more bargaining power with suppliers when you have a large market share in your business.
This can result in lower costs and better terms for your company.
In addition, it can give your company more leverage in negotiations with customers and other partners.
Competitive Advantage
With a large market share, you can use your position to create barriers to entry for new competitors.
Thereby helping you maintain a competitive advantage.
For example, a company with a large market share may be able to invest more in research and development, giving them a technological edge over competitors.
Strategic Planning – What Is Market Share in Business
With a better understanding of the market share, you can better identify potential areas of growth and evaluate the effectiveness of their marketing and sales strategies.
Apart from that, you can also identify areas of weakness and make necessary adjustments to improve your market position.
Market share is an essential metric for businesses since it can provide valuable insights into a company’s position in the market.
It can also help a company make better strategic decisions to improve its performance and competitiveness.
Strategies to Gain and Increase Market Shares in Business – What Is Market Share in Business
There are several strategies that companies use to gain market shares.
Here are some of the top strategies that you can adopt for your business:
Price Reduction
Price reduction is a great strategy to adopt when talking about gaining market share.
This is because it:
Increases Affordability
When you lower the price of your business’s products or services, you make it more affordable for a wider range of customers.
This helps to attract new customers and gain or increase your market share.
Gives You Competitive Advantage – What Is Market Share in Business
Lower prices can give your business a competitive advantage over other businesses in the same industry.
This is because your product or service will become more attractive to price-sensitive customers.
Ensures Increased Sales Volume
Moreover, lowering the prices of your services or products can increase the demand for your services or products.
This can consequently lead to a higher sales volume and increased market share.
Attracting Price-sensitive Customers – What Is Market Share in Business
Lower prices can attract price-sensitive customers.
These are people who are hoping for the best from your product or service but are hesitant about getting it because of the price.
When you lower the price of that product or service, those people who were hesitant will no longer be and get it.
Attract Bulk Buyers
Reducing the prices of your services or products also attract bulk buyers who are looking to purchase products in large quantities.
This can lead to higher sales volume and increased market share.
Reducing Stock – What is Market Share in Business
Price reduction can also help a business to move excess inventory.
With this strategy, you get to sell most of their products in time which helps to reduce storage costs and free up cash.
As great as price reduction is, you need to know that it may also lead to a decrease in profit margins.
So, before opting for and implementing this strategy, you need to carefully consider the potential trade-offs.
Product Differentiation – What Is Market Share in Business
Product differentiation is a strategy that offers unique or superior products to make a business stand out from competitors, attract customers, and gain market share.
This strategy can be achieved in several ways:
Unique Features
You can focus on offering products with unique features or capabilities that competitors do not offer.
This will make your business’s product more attractive to customers, persuade them to patronize your business more, and help you gain or increase your market share.
Quality – What Is Market Share in Business
If you don’t want to use unique features to attract customers, you can work on improving your products’ quality.
Specifically, offering higher quality products than competitors can help a business gain market share by attracting customers who are willing to pay more for a superior product.
Branding
You can opt to build your brand to become strong.
For clarity, strong branding and marketing can help a business differentiate its products and create a unique image in the minds of customers.
Customization – What Is Market Share in Business
If you don’t like any of the other options, you can opt for customization of your products and services.
This is because offering products that can be customized to meet the specific needs of customers can help a business stand out from competitors.
And it can also attract customers looking for a tailored solution.
Innovation
Most people are attracted to new and classy things.
This is why introducing new and innovative products to the market can help you gain business market share.
It does this by setting you apart from the competitors and making customers see your brand as the best.
Sustainability – What Is Market Share in Business
Some people are conscious of the environment – these people usually opt for products that are eco-friendly or sustainable.
So, offering products like this can help to attract this sort of people.
You can decide to use a product differentiation strategy in one or more ways addressed above.
They are all effective for gaining and increasing your market share.
However, think of which strategy would work best for your business and consider its downsides.
If you can effectively handle the downsides that come with them, then you should go for it.
Advertising and Marketing
Advertising and marketing can be effective tools for gaining market share.
We have listed and explained some ways that advertising and marketing can help you gain market share
These include:
Building Brand Awareness
When you opt for the advertising and marketing strategy, it can help you build brand awareness which is essential for gaining market share.
This can be achieved through various channels such as television, radio, print, digital, and social media.
Targeting Specific Segments – What Is Market Share in Business
Advertising and marketing can be used to target specific segments of the market, such as demographics or geographic regions.
This allows the business to channel its messaging and offerings to the needs of specific groups of customers, which can increase the chances of gaining market share.
Influencing Purchasing Decisions
Also, advertising and marketing can influence purchasing decisions by highlighting the benefits of your business’s products or services.
It also highlights pain points or objections that potential customers may have.
During the process of researching and preparing for a marketing campaign, you get to discover customer pain points and challenges.
This insight can be used to create products/services and marketing campaigns that appeal to your customers’ emotions.
Creating a Sense of Urgency – What Is Market Share in Business
You can use adverting and marketing to gain or increase your market share by creating a sense of urgency around your products and services.
This can encourage customers to make a purchase more quickly.
For example, you can decide to create limited-time offers or run flash sales.
Distribution – What Is Market Share in Business
Distribution is the process of making a product or service available to customers and can play a key role in helping a business gain or increase its market share.
Some ways that distribution can help you gain or increase your market share are:
Increasing Accessibility
By making products or services more accessible to customers, you can increase the chances of customers purchasing them.
This can be achieved through effective distribution channels such as retail stores, online marketplaces, or direct-to-consumer sales.
Expanding into New Markets – What Is Market Shares in Business
By utilizing multiple distribution channels, a company can reach a wider customer base and increase its market share.
For example, if your company only sells its products through physical retail stores, it may miss out on potential customers who prefer to shop online.
However, by selling your products on an e-commerce platform, you will increase your reach and accessibility to these customers.
Customer Service
Customer service refers to the company’s actions and activities to meet or exceed customer needs and expectations.
It can play a critical role in gaining or increasing market share.
These are the ways customer service can help you increase your market share.
Building Customer Loyalty
When customers have a positive experience with a company, they are likely to return and recommend the company to others.
As a result, it increases the market share of that company as customer loyalty, and word of mouth are powerful marketing tools.
Differentiating from Competitors – What Is Market Share in Business
Away from that, customer service can also be used as a way to differentiate your company from your competitors.
When you provide excellent customer service, you will be setting your company apart from its competitors.
This will attract customers who value good customer service.
Improving Customer Experience
Good customer service can also help to improve the overall customer experience.
In other words, when you provide a seamless and convenient buying experience for your customers, you will easily attract and retain customers.
You can also use customer feedback to improve your products and services,
Overall, these increase customer satisfaction and ultimately increase market share.
Merger and Acquisition – What Is Market Share in Business
Mergers and acquisitions are the processes of combining two or more companies into a single entity.
It can be a powerful tool for gaining or increasing market share as far as business is concerned.
Here are several ways M&A (Merger and Acquisition) can work to gain or increase market share in business:
Increased Market Share through Consolidation
Merging with or acquiring a competitor can increase a company’s market share by consolidating the market.
By eliminating a competitor, your company can gain a larger share of the market and increase its profitability.
Access to New Markets or Technologies – What Is Market Share in Business
This can also provide access to new markets or technologies.
Let’s assume your company specializes in a particular service or product and acquires a company that specializes in a complementary product or service.
This will not only expand your company’s offerings but also increase its market share.
Synergy
Synergy can be created by merging or acquiring a company when the strengths of two companies or more are combined a new entity can be created.
This new entity will be more competitive than the sum of its parts.
In a nutshell, this can lead to increased market share as the new entity can offer a wider range of services and products.
Diversification – What Is Market Share in Business
In conclusion, M&A can also be used to diversify your company’s business.
If you acquire a company in a different industry, you would be reducing your dependence on a single product or market.
This will help you to reduce the risk of fluctuations in a specific market and increase market share.
Conclusion on What Is Market Share in Business
As we have said above, a market share is the percentage of total sales in a market that is held by a specific company or product.
It is a key metric that businesses use to measure their performance and competitiveness in a particular market.
Therefore, having a large market share can provide several strategic advantages for a business, such as increased revenue and profitability, brand recognition, and more.
You can use a combination of strategies such as advertising and marketing, distribution, customer service, and others to gain or increase your market share.
However, before opting for any strategy to gain or increase your market share, you should consult with experts and legal advisors.
We wish you good luck.
