Understanding market share can be daunting, but it is a vital component of running a successful business. Knowing how to measure and track your organization’s market share within its industry is essential for assessing the overall health of your company. Whether you’re just starting out or have been in business for years, this post will provide timely insight into all the fundamentals of measuring and leveraging your organization’s market share. From strategizing ways to increase brand recognition and maintaining customer loyalty, to delineating tactics for growing revenue and improving profit margins- we’ll cover everything you need to understand about achieving success through effective management of your company’s unique place in today’s marketplace.
What is Market Share?
Market Share is a term used to describe the portion of a market that is controlled by a specific company or product. It measures the total sales of an individual company in relation to the total sales of all companies in its industry or sector. Market share can be broken down into two categories: relative and absolute.
Relative market share refers to the percentage of the market that is held by a particular company or product, while absolute market share refers to the total dollar value of sales that a particular company has in relation to the total industry size. In addition to measuring the success of a particular product or firm, Market Share can also be used as an indicator of competition in an industry.
Companies with a higher market share can be seen as dominant players in their respective industries, while companies with a lower market share may feel the pressure of competing against more established competitors. Market Share is an important metric for businesses to track and monitor, as it provides valuable insight into the success of their products or services.
It also helps to assess the competitive landscape of a particular industry and can provide guidance in making strategic decisions.
Why Is It Important For Startups to track the Market Share?
Following are the reasons why tracking the market share is important for Startups:
1. It helps to monitor the competition:
Startups need to track their competitor’s market share in order to better understand how their products and services are performing against their competitors. This type of analysis can help startups identify areas where they may have a competitive advantage or identify potential opportunities for improvement.
2. It helps you target the right audience:
Tracking the market share can help startups identify who their target market is and what demographic they should be targeting. This can lead to more effective marketing, as well as a better understanding of customer needs.
3. It helps inform strategic decisions:
Knowing your competitors’ market shares can provide valuable insight into industry trends, allowing startups to make more informed decisions when it comes to product positioning, pricing, and marketing. Ultimately, this can help startups better position their products and services for long-term success.
4. It allows you to track progress:
Tracking market share over time helps startups measure their progress over the course of a year or longer. This can provide useful insights into which strategies are succeeding and which need to be tweaked or changed.
5. It helps you understand customer behavior:
Tracking market share enables startups to gain an understanding of their customer’s buying habits, preferences, and motivations. This can help them make more effective decisions when it comes to product development, pricing, and marketing strategies.
Overall, tracking the market share is an essential tool for any startup looking to succeed in today’s highly competitive marketplace. By keeping an eye on their competitors, understanding customer needs and preferences, and tracking progress over time, startups can increase their chances of success. As such, tracking the market share should be a priority for all startups.
How To Calculate the Market Share?
Here is the formula to calculate the Market Share:
Let’s take an example and calculate the Market Share of a company. Let’s assume that the total market sales are $10,000 and the Company Sales are $2,500. Using the formula above, we can calculate the market share for this company as follows:
Market Share = 2,500 ÷ 10, 000 = 0.25 or 25%
Therefore, the Market Share for this company is 25%. This means that out of the total market sales of $10,000, this company accounted for 25%. The higher the market share of a company in its particular industry, the more successful it is considered to be.
What factors affect Market Share?
The following factors affect the Market Share:
1. Price:
The price at which a company sets its product is one of the most important factors in determining its market share. A lower price may lead to more customers, but if it’s too low, profits can suffer and the business may not survive for long.
2. Quality:
Consumers tend to gravitate towards higher-quality products, as they tend to last longer and generate more customer loyalty. A company with better-quality products will likely have a higher market share than one with inferior goods.
3. Brand Recognition:
Consumers are more likely to purchase a product from a brand they recognize and trust. Companies can build recognition through targeted marketing campaigns or by being the first in the market to provide a unique product.
4. Distribution:
Companies need to make sure that their products are available in the right places at the right times. If customers don’t have access to a company’s product, then it won’t get any sales and its market share will suffer as a result.
5. Promotion:
Companies need to promote their product effectively in order to increase their market share. Running effective campaigns and offering discounts are some of the ways companies can get people interested in their products.
6. Competition:
The presence and success of competing products is an important considerations for a company’s market share. If there are many competitors, then companies may need to reduce prices or invest more in marketing to maintain their market share.
7. Innovation:
Companies need to stay ahead of the game by continually innovating and bringing new products to the market. This not only helps them keep up with customer demands but also helps them gain a larger portion of the market share.
8. Customer Service:
Companies that have good customer service and provide helpful information to their customers will be more likely to retain them and improve their market share.
By considering these factors, companies can better understand the dynamics of the marketplace and position themselves in a way that maximizes their market share.
What is a good Market Share?
A good market share is one that meets the company’s goals and objectives. It is important to set realistic goals that can be achieved within a certain timeframe, as well as setting targets for long-term growth. Companies should aim to increase their market share within their chosen industry in order to remain competitive and profitable.
A larger market share often means more profits for the company; however, companies should strive to balance short-term gains with long-term success. Additionally, they should also remember to consider their competitors’ market share and adjust accordingly in order to remain competitive.
Quotes about Market Share
- “Having a big market share is as much a responsibility as it is an opportunity.” – Bill Gates
- “A company’s market share isn’t just about having the most customers, it’s about being the preferred choice for those customers” – Michael Porter
- “Market share is not only important but also a reflection of the competitive strategy that is being pursued.” – Phil Knight
What are examples of Market Share?
If a company generated $10 million in sales during the latest fiscal year and total industry sales amounted to $200 million for the same period, the company’s current market share is 5%. On the other hand, if their top competitor earned $40 million in sales, then the relative market share of our company is 25%.
To calculate the relative market share, we divide our company’s sales of $10 million by the total industry sales of $200 million to get 5%. Then, we divide this figure by the top competitor’s sales of $40 million to reach 25%. In conclusion, the company’s current market share is 5%, while the relative market share of our company compared to its top competitor is 25%.
Example 2:
JBL Incorporated has reported gross revenue of $30 million, while the industry in which it operates is worth a total of $500 million. To calculate the market share of JBL Inc, we can use the following equation: Market Share = Company’s Total Sales / Industry Sales.
This produces an answer of 6%, which means that JBL Inc holds a 6% market share of the industry. Hence, it can be concluded that JBL Inc has a 6% share in the total sales of the industry.
Tips to improve the Market Share
following strategies can help to improve the Market Share:
1. Develop a strong brand identity:
Having a unique, recognizable, and well-known brand makes customers choose your products over competitors’ offerings. Invest in developing and promoting an effective marketing strategy to create a lasting impression of your company’s values, purpose, and mission.
2. Engage in market research:
Understanding the target audience, their needs and preferences will help you develop products or services that will meet the customers’ demands. By engaging in market research, a company can identify potential gaps in customer service and make necessary improvements to increase its market share.
3. Invest in effective marketing:
Develop and implement an effective marketing strategy by using traditional as well as digital channels to reach out to potential customers. Use social media, website design, SEO, and content marketing to get people’s attention and establish a strong presence in the market.
4. Focus on customer satisfaction:
Make sure that your customers are satisfied with your products or services. Provide quality customer service by offering after-sales support and resolving their queries quickly. Make sure to ask for customer feedback and take timely action if there are any issues.
5. Offer discounts and promotions:
Offering discounts, promotional offers, and loyalty programs can help in attracting more customers. You can also run special campaigns or contests to engage your target audience and increase sales.
6. Look for new markets:
Explore opportunities in new markets and increase your customer base. Analyze the current market trends and identify potential markets that can bring more revenue to your business.
7. Innovate:
Introduce new products or services, launch innovative marketing campaigns, and use AI-driven technologies to create a competitive edge over the rivals in the market.
8. Build relationships:
Establish strong ties with customers, partners, and stakeholders in the industry. Building relationships can help you understand customer needs and create a strong base of loyal customers.
9. Invest in employee training:
Train your employees to become experts in the industry so that they can deliver better services to customers. Good customer service is an essential part of increasing market share, and investing in employees will ensure your success.
10. Analyze your competitors:
Keep an eye on your competitors and analyze their strategies to understand how they are gaining market share. Knowing the strengths and weaknesses of your rivals will help you develop effective strategies for capturing more market share.
Implementing these strategies can help businesses improve their market share and stay ahead of the competition in today’s competitive market.
Wrap Up
Market share is important to understand when trying to grow a company. By taking the time to calculate your market share, and that of your competitors, you can make more informed decisions about how to price your product, where to advertise, and what promotions to run.
Additionally, understanding your market share can help you identify opportunities for growth. If you want help calculating or analyzing your market share, contact us today. We would be happy to assist you in making data-driven decisions about your marketing strategy.