What Is Market Share? Basic Facts About Market Share

In a fiercely competitive market, market share is the figure that shows which brand is first, second, third and so on. It is always changing. Every business keeps working on activities and strategies to raise it. MONA Media will help you understand what market share is and which strategies are used to increase it.

What is market share?

Market share is the share of a market, usually shown as a percentage, that a company or organization holds. In other words, a company's market share is its total sales compared with the total sales of the whole industry it operates in. All of these definitions apply to a specific period of time.

Market share formula

Market share is calculated by dividing the company's sales in the period by the total sales of the whole industry in the same period.

What market share means for a business

Market share is the most important measure a company can use to judge how well any revenue effort has worked. For example, a marketing campaign, a branding effort or a CRM customer relationship program.

Your market share figure shows how well you are doing compared with competitors. It lets you measure the impact of your strategies and how well they were carried out on business results. It also helps you judge how effective your past activities were.

What effects does market share have on a business?

• Higher profit from economies of scale: When a company's market share grows, it can make more products or deliver more services in a market with more consumers and higher demand. This allows mass production. The production cost per unit falls, so the profit on each unit rises.
• More sales and more customers: Higher market share also helps drive higher total sales. People follow the crowd: when they see many others using a product or service, they get curious, look into it and try it. So the number of users grows.
• Wider brand reach: Once market share rises, the brand's reputation grows with it. In turn, a good reputation attracts the attention of new customers, and sales volume goes up again.

• Dominating the industry: When a business holds a very large market share, it becomes the dominant player in its industry. Smaller businesses have to find other ways to survive and compete with it, which is often very hard.
• More bargaining power: As its market share grows, a business gradually becomes a powerful, dominant player. It can then use that position, for example to negotiate with suppliers and members of its distribution channel.

Strategies to increase a business's market share

To raise their market share, businesses keep working on a range of activities. Here are the main strategies.

Find a niche market and create products that fit it

When a large market already has too many big players competing fiercely, pushing your way in is not a smart decision. Instead, research and find smaller markets, called niche markets, where you can breathe and grow.

See also: 5 ways to identify the right niche market

Understand your direct competitors

Understanding competitors means finding out what other market leaders are doing and comparing your products and services with theirs. Only when you know the competitive landscape can you see the gaps to fill or the differences you already have. From there you can act to stand out and emphasize what is unique about you.

See also: 7 steps for an effective competitor analysis

The 4P strategy: product, price, place and promotion

Customers increasingly pay attention to buying high-quality products offered in a variety of sizes and types. If you deliver that, you are likely to keep existing customers and win new ones.

A business can expand its market share by lowering the price of its products or services. Lower prices attract more customers, which widens the buyer base and increases sales.

Place refers to where a business's goods are sold and where they sit in the store. A product displayed in the middle aisle of a retail store or supermarket will catch the eye of people walking by. Curiosity leads them to look into the product, try it, and, if it suits them, come back to buy more.

Promotion activities such as advertising, public relations, personal selling, direct marketing and sales promotion cost money but are effective for increasing market share. With fierce competition on the market, a brand only survives if its message spreads widely and stands out.

Technology innovation

When a company brings the first technology-based products to market, consumers want to own them. Everyone wants to be among the first. Even if you later sell that technology to a competitor, or the competitor learns the same thing, the reputation of being first has already attached itself to your business.

Consumers tend to remember the first very clearly. As a result, they are highly loyal. They are reluctant to change and test the quality of a product from a new brand.

Increase customer loyalty

Businesses stop customers from switching to competitors by strengthening relationships. This can mean following up about the product experience, saying thank you after a purchase, giving coupons, or giving rewards at events.

See more: How to build customer loyalty

Focus on employees

Companies with the highest market share in an industry usually attract many of the most skilled and dedicated employees. Bringing in these strong people cuts training costs. The company can also put more resources into its core competencies.

The way to make employees loyal and committed to their work is to offer reasonable, competitive pay, benefits and treatment. A healthy, energetic working environment also helps keep talented people.

Acquisitions and mergers

Finally, one of the most effective ways to increase market share is to acquire a competitor. With a merger, the company succeeds in two ways: it gains more customers and has fewer competitors.

Understanding what market share is will help you place your business in the market and in your customers' minds. Increasing market share is neither easy nor quick. It takes a long time and a well-planned strategy and action plan.