As a marketer, it is essential to have a solid understanding of market share. This will allow you to evaluate how well your business performs compare to its rivals and devise innovative marketing methods to expand your pool of potential clients. Therefore, this article will provide an overview of what market share is, how it can be calculated, some instances from real life, and instructions for how you can grow it.
List of Contents
What Exactly Is Market Share?
A company’s market share can be defined as the proportion of an industry’s overall revenue that is earned by that particular business. To determine a company’s percentage of the market, take the total revenues of the company during a certain time period and divide that number by the total sales of the entire industry. Data analysts and other professionals use this indicator to evaluate the size of a company inside a specific industry as well as the company’s presence in that industry.
In most cases, the success of a company may be evaluated by looking at its percentage of the market. Since their competitors are looking to follow their lead, companies that have a substantial portion of the market are able to set the standard prices for the industry. Concurrently, corporations that hold a significant portion of a market may also be subject to anti-competition regulations. These are laws that restrict sales and are enacted by the government to prevent a single company from monopolizing an industry.
The Importance of Market share
Notably, the market share of an organization is a valuable indicator because it provides insights that go well beyond simply indicating the firm’s relative size within the market it is operating in. When you are aware of your role in the market, you may determine not only how successful your company is in comparison to its rivals but also how successful your marketing, advertising, and efforts to produce new products have been. Therefore, knowing and assessing a company’s market share is essential for every business that wants to expand its operations or increase its profits.
Market Share Examples
It is possible that real-life examples will make it simpler to comprehend market share. Thus, we will discuss some examples of companies that you may already be familiar with below.
1. Tesla Market Share
Tesla is an automobile manufacturer that produces electric vehicles (EVs). It has an 18% market share in the EV business. While the percentage may appear insignificant, it is crucial to remember that the global EV market is substantially less than that of regular vehicles. EVs have a 2.8% market share in the vehicle sector, while Tesla has a.8%. These distinctions are crucial, which is why it is critical to compare your company to its direct competitors rather than the market as a whole when analyzing relative market share.
2. Google Market Share
Since it holds a market share of 91.86 percent, Google is currently the most widely used search engine in the entire world. Bing, the second-largest industry leader, has a market share that is only 2.71%. Thus, it is easily outclassed by this product.
After you have determined your share of the market and analyzed your position in comparison to those of your rivals in the sector, you will be able to begin formulating a plan to boost your company’s total income.
How to Calculate Market Share
The ways tp calculate your market share is not too difficult. You just have to find out how much money your company made in total sales during the chosen time period, then take that number and divide it by the entire amount of money your industry made during the same time period. After you have obtained this result, multiply the number by 100 to determine your percentage of it.
Market Share Formula
The process of calculating your market share will provide you with an overall understanding of your position in the industry. However, it is also helpful to have an understanding of how you compare to the companies that are directly in your line of business.
Relative Market Share
Your success can be measured against that of industry leaders by looking at your relative market share. You are not using the whole revenue of the industry. However, you are dividing it by the market share of your leading competitors in the industry and then multiplying the result by 100. The outcome will demonstrate to you what proportion of the market you control in comparison to your most significant rival. The formula for determining relative market share is depicted in the following figure.
How Can Companies Increase Market Share?
A company can increase its market share by providing innovative technologies to its clients, developing customer loyalty, employing skilled personnel, and acquiring competitors.
Providing Innovative Technologies
One way for a company to gain market share is through innovation. When a company introduces a new technology that its competitors have yet to offer, consumers who want to possess it to buy it from that company. As a result, many of those customers become devoted customers, increasing the company’s market share while decreasing the company from which they switched.
Developing Customer Loyalty
Companies can maintain their existing market share by strengthening customer relationships, which prevent current clients from defecting when a competitor launches a hot new offer. Even better, companies can increase it with the same easy strategy. Since delighted customers frequently tell their friends and family about their pleasant experience, it leads to new consumers. Gaining it through word of mouth enhances a company’s revenues without increasing marketing costs.
Employing Skilled Personnel
Companies with the largest market share in their respective industries usually have the most competent and dedicated personnel. Bringing in the finest people lowers turnover and training costs, allowing businesses to dedicate more resources to their core capabilities. Offering competitive salaries and benefits is a tried and true method of attracting the best employees.
Acquiring Competitors
Finally, acquiring a competitor is one of the most certain ways to expand market share. A corporation accomplishes two things by doing so. It leverages the newly acquired firm’s current client base while also reducing the number of enterprises competing for a piece of the same pie by one.
Conclusion
To conclude, a company’s market share can be defined as a percentage of the industry’s overall sales. When compared to other businesses operating in the same market, it indicates the extent to which it outsells its rivals. Importantly, it can provide insight into both its size and the level of sway it wields within the sector in which it operates. Moreover, it is also a possible indicator of advancement and achievement.
In most cases, a company’s goal should be to increase its market share. Applying new technology, producing a product of higher quality, delivering a higher quality service, implementing good marketing, acquiring competitors, and developing customer loyalty are all ways to accomplish this goal.
FAQs
A company or product’s market share is the percentage of a given market that it controls.
Market share is essential since it quantifies a company’s competitive standing within its industry. It can also be used to assess the effectiveness of a company’s marketing and growth strategies.
A company’s competitive situation may not be fully represented by market share alone. Market growth rates, client loyalty, and the strength of competitors are further considerations to consider.
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Source: Investopedia, Hubspot