Achieving Profitability Through Market Share

Market share is the percentage of a company's industry's total revenues that it generates. The company's sales for the time period are divided by the total sales for the sector for that time period to determine market share. This metric is employed to provide a basic understanding of a company's size in relation to its market and rivals. The business with the biggest market share in a certain sector is the market leader in that sector.

 

Why Measure the Market Share?

 

A higher market share typically translates into better sales, less work required to sell more, and a significant barrier to entry for other competitors. Market share is a measure of customers' or businesses' preference for one product over other similar items.

 

Additionally, because market share is a significant indicator of market competition, business executives can use it to recognize important consumer behavior trends, assess the overall market's growth or decrease, and understand their market opportunity and potential. By measuring consumer perception of new goods and services, promotions, pricing plans, and other important business initiatives, organizations can better position themselves for an increase in profits by knowing market share.

 

Advantages of Market Share

 

Market share growth and declines are closely watched by investors and analysts because they might indicate how competitive a company's goods or services are. A company that is maintaining its market share is growing revenues at the same rate as the whole market for a good or service. A company's revenues will increase more quickly than those of its rivals if it is increasing its market share. 

 

Gaining market share can enable a business to expand its operations and boost profitability. A business may strive to increase its market share by providing new or different items, cutting prices, or employing advertising. In addition, by appealing to additional audiences or demographics, it can increase the amount of its market share. 

 

Impact of Market Share

 

Changes in market share have a greater effect on a company's performance in cyclical or mature industries with limited growth. Companies in industries that are experiencing growth, however, are less affected by changes in market share. Because more people are entering these markets, businesses can still increase revenues even though they are losing market share. Sales growth and margins have a bigger impact on a company's stock performance in this situation than other factors do.

 

Market share is fiercely competitive in cyclical sectors. In comparison to other aspects, economic considerations have a greater impact on the variation in sales, earnings, and margins. Due to competition, margins are often minimal and operations are handled as efficiently as possible. Since sales are made at the expense of competing businesses, some businesses extensively invest in marketing initiatives or even use loss leaders to boost sales. 

 

Companies in these sectors might be prepared to temporarily lose money on their products in order to pressure rivals into folding their tents or going bankrupt. They try to increase prices once they have a larger part of the market and their rivals have been driven out. This tactic can either succeed or fail, compounding their losses. As a result, several industries are dominated by a small number of powerful companies, such as discount wholesale retail, which includes Sam's Club, BJ's Wholesale Club, and Costco.

 

How Can Companies Gain Market Share?

 

By providing clients with cutting-edge technology, fostering customer loyalty, appointing brilliant staff, and purchasing rival businesses, a firm can grow its market share.

 

Updated technology

 

One strategy for a corporation to gain market share is innovation. Consumers that want to acquire a new technology that a company brings to market buy it from that company, even if they had previously done business with a competitor. Many of these customers end up staying with the business, increasing its market share while reducing that of the company they went to.

 

Client Loyalty

 

By fortifying customer connections, businesses safeguard their present market share by preventing existing consumers from defecting when a rival launches a tempting new offer. Even better, businesses can increase market share using the same straightforward strategy because happy customers usually recommend their pleasant experiences to friends and family who later become new clients. 

 

Word-of-mouth market share expansion boosts sales without corresponding increases in marketing costs.

 

Talented Workers

 

Nearly always, businesses with the largest market shares in their respective industries hire the most talented and devoted personnel. Employing the finest people lowers turnover and training costs and frees up resources for businesses to concentrate on their core capabilities. 

 

Offering competitive salary and benefits is a tried-and-true strategy for luring the best workers, but employees in the twenty-first century now also look for softer advantages like flexible work hours and informal work settings.

 

Acquisitions

 

Last but not least, acquiring a rival is one of the most reliable ways to grow your market share. A business achieves two goals by doing this. It draws on the clientele of the recently acquired company and eliminates one of the competitors vying for the same pie. 

 

When their firms are in a growth model, savvy executives, whether they are in charge of small businesses or giant organizations, constantly have their eye out for a suitable acquisition deal.

 

Also Read: How Is Predictive Analytics Used In Finance?

 

Example of Market Share

 

The market share of particular markets serves as the benchmark for success for all multinational firms. Due to its continued rapid growth as a market for numerous items, China has been a significant market for businesses. For instance, Apple Inc. measures the growth of its business using data on its market share in China. 

 

With Vivo and Oppo, Apple's market share for the Chinese smartphone market was tied for second place in Q4 2020 at 17%. Numerous other brands made up 29% of the market for mobile phones in China at the time. From Q1 to Q3, Apple's market share in China decreased to 12% as Vivo and Oppo gained ground. Apple saw a comeback to 22% in Q4 2021. It stayed at 18% in Q1 2022.

 

What is a Low Market Share?

 

A market share that is less than half that of the leader in the industry is seen as being low. The company with the 10% market share would be regarded as having a low market share because 10% is less than 20% (or half of 40%), the market share of the industry leader, which is 40%.

 

The Profit Impact of Market Strategies

 

Advertising

 

To increase brand recognition and create a favorable perception of a brand is one of the objectives of marketing strategy. One of the essential components of a market strategy that works toward this objective is advertising. Companies that advertise fare better than those that reduce their advertising, particularly during economic downturns. Ads produce sales that have an immediate influence on earnings. Long-term brand value building enables increased pricing and profitability.

 

Promotion

 

Advertising has a somewhat different impact than promotions that provide discounts or incentives. Promotions boost profits and sales in the near term, but long-term brand damage is a common result of reductions. 

 

This means that promotions can be used as a tactical short-term strategy to address specific difficulties like overstocks or end-of-line concerns. Their effect on profit over time is either neutral or maybe detrimental.

 

Consumer Assistance

 

Although providing excellent customer service is not strictly a marketing function, market strategies might concentrate on doing so to get a competitive edge. The five major components of customer service are experience, awareness, association, attitude, and attachment. 

 

Some of these factors are influenced by advertising, but the objective is to maximize customer happiness by putting the consumer first in every phase of the buying and owning process. High client retention, decreased customer acquisition expenses, and increased profitability are the results of a successful plan.

 

Quality

 

Quality is the foundation of the other market strategy components. Maintaining profitability is tough without a high-quality product or service. Market share, worker productivity, and customer satisfaction all rise when quality is the main focus of a marketing strategy. In this context, quality refers to achieving and exceeding client expectations. 

 

High levels of consumer satisfaction can be achieved with fewer resources by using advertising to reinforce those expectations. Higher profits are produced as a result of these cost savings, as well as an increase in volume from a larger market share and improved productivity.

 

Techniques for Enhancing and Growing Market Share

 

You can start thinking how to raise your company's overall revenue once you compute your market share and are aware of your company's position. The four actions listed below are crucial for increasing your market share:

 

Create novel goods and features

 

The ongoing and regular introduction of new products results in new sales, which boost market share. Companies with a bigger market share than those who don't frequently innovate and introduce new and superior technology to the table. After acquiring new clients, a business can focus on fostering client loyalty and forging close bonds with its clients.

 

Attract new, more extensive demographics 

 

It's crucial to consider how to get in touch with more of the market. The marketing department of a business may run special offers, specials, or discounts to draw in new clients from the target market and raise their profile in that industry.

 

Continual enhancement of high-quality goods 

 

Companies who continuously show that their products are of the best quality tend to be ones that increase their market share in sectors like automotive and telecoms. As examples of this strategy, think of the reputations for excellence that companies like Apple, Audi, and BMW have established for themselves.

 

Increase brand recognition 

 

It's crucial to "get your name out there" so that customers are aware of who you are and what your business does. The development of your company's brand awareness and national marketing both play significant roles in growing your market share if you're considering how to raise the market share of a brand. Larger businesses typically hold the largest market share due to their ability to deliver goods and services both successfully and efficiently.

 

Increase your market share by becoming a well-known name brand in your sector by investing in marketing initiatives you support.

 

How to Attract New Customers?

 

Getting new clients is one strategy to increase your market share. A business can grow its clientele in a number of ways. Here are some to think about:

 

• Enhance marketing messaging aimed at both current and prospective customers.

• Reestablish touch with clients who haven't heard from you in a while by sending warm welcomes, exclusive deals, and discounts.

• Introduce a referral program to existing clients that offers alluring incentives in exchange for their friends' and family's contact information. Ask your most happy consumers to recommend you if a program isn't doable.

• Encourage your most engaged consumers to actively promote your business through their preferred medium by acting as brand ambassadors.

• Make sure your website conveys the appearance, feel, and message you want it to. An excellent chance to discuss your company's objective and goals, as well as those established to improve the lives of consumers and others, is during a website evaluation.

• Keep an eye on the websites and apps that provide company ratings and reviews. Genuinely respond to compliments as well as criticisms. Please make every effort to assist individuals whose posts call for assistance. Think about pointing good comments to the company website.

 

Conclusion

 

Market share is the percentage of a company's total industry sales. A corporation has more sales than its rivals in its particular industry the higher its market share. Market share is a measure of a company's size and level of influence within its sector. It may also be a sign of development and achievement. 

 

In general, businesses aim to grow their market share. You can achieve this through introducing new technology, providing a product of higher quality, using smart marketing, purchasing rival businesses, and cultivating consumer loyalty.