for more innovative that it is a company, it is to be expected that it will have competitors with whom it will compete for a greater share of the market.
This share, also known as Market Sharerepresents —among several peculiarities— the portion of the public that your business was able to conquer, which is directly proportional to the income generated by that part of the market.
Do you want to know more about the importance of the concept of market share, understand how to calculate it and even consult tips on how to increase this indicator for your company?
We show you all that below!
What is market share?
We can understand the idea of market share from various aspects. Whichever parameter is used, the objective is to determine, through percentages, To what extent do companies in the same field of activity stand out from the rest?.
If we imagine the potential market of a company in a certain sector as if it were a pizza, the market share would be the slice of that public that consumes your products and services.
In that case, it is brand penetrationan important piece of information to plan and evaluate the marketing actions of the company.
We can also evaluate the market share from the point of view of the sales volume or even the Number of usersif the company operates in the digital asset industry.
Another way to view market share is as a reflection of trade size of the company against your competitors, something that is closely related to the value of the brand, and of the company itself, in the market.
To give you an idea, in the search engine industry, Google has a market share of around 92%, while Bing has about 3% and Yahoo has almost 2%.
That says a lot about the strength of Google, which is the search engine of choice in the vast majority of countries and commands considerable dominance over its opponents.
Why is market share so important?
By tracking how that engagement increases or decreases over time, organizations have a good indication of whether their marketing strategies and engagement-related actions strategic planning are having the desired effect or not.
While the increase in market share may be a good sign, its decrease may mean that measures must be taken to contain the competitive pressure.
Analyzing the business in that aspect is a way to understand how it is performing, taking into account the ecosystem of other companies.
When we evaluate growth only by internal indicators, checking the increase in net income from one quarter to the next, for example, we have a comparison factor between the results of the organization itself.
By calculating and examining market share on a regular basis, we find incentives to focus on company goals or to create others and we have an extra incentive to look for new opportunities or identify the weaknesses of the company.
Even companies with the largest market share often enjoy competitive advantagessuch as negotiating power with suppliers and credibility to establish alliances.
How to calculate that indicator?
Now let’s look at three ways to calculate market share.
If we cross the internal customer base data With demographic studies and statistics published by organizations in Latin America, it is possible to have a very close notion of the company’s market share.
Let’s say an organization sells products dedicated to women ages 20-34 and operates in a region that has 200,000 women in that age group.
If the company has 10,000 registered customers, we can divide that number by the number of potential customers and we will reach a market share of 5% (10,000 / 200,000 = 0.05 = 5%).
Market share = Clients won by the company / Potential clients in the company’s area of operations
Calculating market share based on revenue may seem straightforward, as we only need to divide the company’s revenue by the total revenue of its industry for the period.
Market Share = Revenue of the company / Total revenue of the most relevant companies in the sector
The problem is that, depending on the industry you belong to, that information will hardly be available.
In that case, it may be necessary make estimates or commission studies to get a minimally accurate estimate.
The calculation with the market value follows the same reasoning as the previous criteria.
Market Share = Market value of the company / Total market value of the most relevant companies in the sector
If your company is valued at 50 million pesos and in your sector there are only four other relevant competitors, quoted at 25 million each, your market share will be: 50 / (50 + 25 + 25 + 25 + 25) = 50 / 150 = 0.33 = 33%.
Brand penetration is already a more subjective factor, which will require tools worthy of market research.
There are ways to conduct such a study by promoting surveys and interviews to consumers on your own, but the ideal is to hire this service from a specialized company.
In this case, the market share calculation is more complicated, since it will involve the margin of error and statistical concepts that go beyond the focus of the post.
How to increase your company’s market share?
It’s time to check out the important tactics companies use to increase their market share.
Create new marketing strategies
There are companies that offer quality products, but do not disclose what they have to contribute to the market. Here, Digital Marketing strategies can be excellent allies to attract new customers and increase brand recognition.
With relatively low initial investments, it is already possible to see an interesting return. By identifying the most suitable channelswe obtain even more satisfactory results.
Invest in innovation
The development of innovative products and services it is another way to get a share of the competition for your company. Remember that innovation is not exclusive to startups or technology organizations.
With innovation management measures and the maintenance of an organizational culture focused on creative problem solving, significant progress has already been made in that direction.
Improve the relationship with the client
Provide good customer service and aftermarket that demonstrates how much the company values its consumers is one way to promote loyalty of those people. As a result of that loyalty, they will favor your brand and even recommend your company to others.
We saw, then, that market share has a number of aspects. Knowing and monitoring it is a way of knowing if the evolution of the business is going according to plan or needs some adjustment, as well as being a real opportunity to know how you position yourself in the industry in which it operates.
Do you want to know other tips on how you can develop your business and thus achieve a more advantageous market share? Download the Digital Competence ebook right now!