Market share is a luxury that only established companies can really afford to focus on, but it’s by no means a frivolous endeavor. A company’s market share is the percentage that it controls of the total market that exists for its goods or services. If it has a market share of 100%, it has a monopoly. If it has a market share of 50%, it’s still incredibly powerful.
Calculating Market Share
Market share is calculated simply by measuring the percentage of sales that a company makes compared to the market as a whole. For example, if a company sells $500 worth of product and the national market is worth $10,000, the company has 5% of the market share. There’s little reason not to want to increase this market share; other companies will constantly be trying to increase theirs and market share is a zero-sum game. Having a higher market share gives players a competitive advantage, as they will be able to take greater advantage of economy of scale to receive better prices from suppliers, increase their buyer power and decrease the overall cost of production per unit.
Strategies to Boost Market Share
When companies look to boost their market share, there are many strategies they can employ.
One strategy is boosting customer loyalty as this will help to prevent customers from leaving your brand and settling with a competitor. If you don’t work at increasing customer loyalty, your competitor might, which will mean you might never get them back. There are many examples of ways of improving customer loyalty, such as when HP built a new global reward program. According to the web design agency in New York who built their website for them, creating a digital loyalty program that offered points and bonuses for every purchase led to 56% of all customers being repeat customers by six months.
Another way to increase market share is simply by innovating more than competitors. When a firm markets a new technology or an innovation on the market-standard product, anybody who wants to be at the forefront of innovation has to buy from that company regardless of where their brand loyalties lie. This allows a company to quickly capture market share from competitors – a great example being Apple. Apple did make some innovations, but they were mainly just great at marketing the market’s innovations like they were company-specific. This led to floods of consumers flocking to Apple so that they didn’t miss out on the new and exciting consumer tech and soon Apple became the most profitable company in the world.
In order to keep market share high, it helps for companies to have more skilled and more engaged employees. For that reason, company culture can have an impact on market share. Having good employees working for the company will reduce wasted time and money spent onboarding or finding new employees, instead allowing a company to focus more on their offering.
Another simple strategy that companies use to increase market share is simply to acquire a competitor.