A substantial market share is essential for any business to thrive in today’s competitive landscape. It allows you to increase profits, expand into new markets, and gain visibility among potential customers. But how do you go about increasing market share?
In this blog post, we’ll discuss methods I use to help businesses grow their market presence and capture more available opportunities. We’ll look at strategies such as building a brand identity, utilizing digital marketing tactics, leveraging customer data insights, and more. Let’s dive in…
What Does Market Share Mean?
Market share refers to the percentage of an industry’s total sales that is earned by a particular company over a specific time period. It is calculated by taking the company’s sales over a specified time period, and dividing it by the total sales of the industry over the same period.
A leader in this area of thought is Michael Porter, who argued that companies should focus on strengthening their position within an industry in order to gain a substantial market share. According to Porter, “The idea behind gaining market share is that as you increase your sales within an industry, you can achieve economies of scale, which will lower costs for everyone involved.” Porter’s ideas are still widely used today in crafting business strategy.
Understanding market share is an effective way for companies can make informed decisions about how to structure their products and services, and which markets and customers they should target to maximize their sales.
The importance of market share is that it’s a vital indicator of a company’s success as it relates to its direct competitors, as businesses must stay up-to-date with the latest market trends to remain competitive. Not paying attention is how some formerly giant companies wind up going by the wayside, as up-and-coming competitors ate away at their market share without them noticing until it was too late to recover.
What Formula is Used to Calculate Market Share?
Market share is calculated by taking your total sales in a specific market, and dividing it by the total sales in that industry for a given time period. It’s valuable to measure over multiple time periods so you can see how your market position has changed over time.
Think of this as an indicator of how much of the market your company owns or can influence. Knowing the size of your share lets you measure and compare your success with that of others in the industry, then you can make a plan to increase it.
Benefits of Increased Market Share
Gaining a larger “piece of the pie” is a critical factor for companies seeking scalable growth and long-term success. The benefits of increase market share go beyond the obvious revenue boost.
Having a larger share of your market provides significant advantages to your business, including increased brand recognition and credibility, giving you a competitive edge in the industry. Additionally, it facilitates economies of scale, leading to cost efficiencies and improved profitability.
As you expand your customer base within a particular niche, you gain valuable insights into diverse consumer preferences, allowing you to fine-tune your products or services for better alignment with market demands. Moreover, an large client base acts as a powerful buffer against market downturns and fluctuations, bolstering stability and resilience.
Being a market leader puts you in a stronger position to negotiate partnerships and secure favorable deals with suppliers, creating new avenues for growth.
Increasing market share requires a well-crafted strategy, meticulous execution, and a deep understanding of customer needs and behaviors. However, the benefits are worth the effort, propelling your company toward sustained prosperity and prominence in your industry.
9 Ways to Increase Your Market Share
Increasing the current market share is a fundamental objective for any business owner aiming to thrive in competitive industries. Achieving this goal entails a multifaceted and adaptive approach. Here are the best methods to consider.
Innovation is one of the top drivers of increase in market share. By continuously exploring creative solutions and reinventing products or services, businesses can capture the attention of their target audience.
Pioneering groundbreaking features, incorporating cutting-edge technologies, or introducing novel business models can generate a buzz in the market and attract new clients. Additionally, staying ahead of competitors through innovation cultivates brand loyalty among existing clients. Whether it’s revamping existing offerings or introducing entirely new ones, embracing innovation builds a culture of continual improvement, adaptability and growth, propelling businesses toward a larger share of the market.
2. Price Reductions
Disclaimer: When considering your pricing strategy – proceed with caution.
Lowering prices can motivate would-be buyers to leave their current service provider and give your company a shot; however, it is critical to balance price reductions with maintaining profitability and value perception.
If you choose to adopt this strategy, be sure your value-based messaging is clear and that you have a plan in place to develop a genuine relationship with the client to earn their trust and repeat business. Otherwise they’ll expect a discount on the next transaction, and you’ll be on the path to eroding your bottom line.
Some ways to do this well are through bulk discounts or subscription-based pricing models that incentivize long-term customer commitment beyond that initial promotion. Careful pricing strategies can position a company competitively in the market and drive the business’s sales in order to capture a larger market share.
3. Customer Loyalty
Fostering strong customer loyalty can lead to an increase in overall market share. Loyal customers are repeat customers who provide positive word-of-mouth endorsements, online testimonials, referrals, and resist switching to competitors.
To cultivate loyalty, companies must prioritize exceptional customer experiences, personalized interactions, and reliable after-sales support. Implementing loyalty programs that reward frequent buyers or offer exclusive perks can further solidify relationships. Moreover, actively seeking and responding to customer feedback builds trust and demonstrates a commitment to meeting customer needs. As loyal customers become raving fans, they contribute significantly to reaching a high market share through their advocacy and recommendations. In other words, they are the most effective marketing resource a business can have.
4. Increased Quality
A company can increase its market share by enhancing goods or service quality. Customers gravitate towards brands that consistently deliver superior quality and reliability.
Improving product design, sourcing higher-grade materials, or refining service processes can all elevate perceived value in the eyes of consumers. Raising quality standards also results in reduced returns, warranty claims, and customer complaints, leading to improved customer satisfaction and retention rates.
Positive reviews and favorable word-of-mouth generated by superior quality offerings can attract new customers and gradually improve market share.
5. Identify New Customer Segments
Identifying new customer segments is not just about boosting market share, but also “wallet share.” That is, the right strategy gives you access to new buyers, while simultaneously increasing your opportunities to do more business with every customer.
Embracing this strategy enables businesses to tap into previously overlooked opportunities and propel growth, and strengthens your market position in the ever-changing business landscape. Conduct market research so you can identify untapped potential within your existing client base.
For example, a landscaping company could add a hardscaping division, assisting their client base with their entire outdoor aesthetic. A mechanic could add a car detailing division, offering the convenience to their customers of taking home a fully repaired vehicle that also looks and smells good as new.
Implementing strategies to increase both market share and wallet share will help you solidify your business presence in the market, and outperform your competitors.
6. Acquire Other Companies
Acquisition is a process in which one company purchases a competitor, thus taking it out of the market and absorbing its market share. It’s a powerful strategy to add market share quickly, but there are many other benefits.
Acquiring a competitor does not only add to your client base, but it also extends your marketing reach, and can give you access to top talent or expertise, improve your buying power, and short-cut the otherwise organic growth process.
7. Seek Partnerships
Collaborating with strategic alliances is a mutually beneficial strategy for increasing market share. Partnering with businesses that serve the same target audience in a non-competitve way means that both companies have the opportunity to benefit from others’ reputation and/or database. Joint marketing initiatives, co-branded products, or cross-promotions can amplify brand exposure and drive sales, making it a win-win relationship.
Strategic partnerships also enable businesses to leverage each other’s strengths, share resources, and tackle market challenges collectively. Building strong relationships with partners fosters trust, credibility, and a broader market presence, ultimately contributing to market share growth.
8. Generate New Business Leads
Grabbing a larger percentage of a market requires continuously attracting new customers. Employing targeted marketing campaigns and lead-generation strategies can help reach potential buyers and cultivate interest in products or services.
Digital marketing channels, content marketing, social media advertising, and search engine optimization can improve brand visibility and generate qualified leads – but the reality is these strategies are under-utilized by most businesses. See, while many businesses dabble in these areas, the lack of consistency or well thought out strategy means their menial efforts are just a waste of time and resources.
However, a targeted strategy that is executed well will not only increase exposure, but will also help with lead conversion. That is, your marketing more or less pre-sells your prospects, making it easier for your sales team to convert those leads into customers, and steadily increasing your market share over time.
9. Introduce New Technology to the Market
Introducing new technology can be a game-changing strategy for businesses aiming to increase their current share of the market. In today’s rapidly evolving digital landscape, technological advancements offer businesses unique opportunities to innovate, expand their offerings, and reach new customer segments.
But what if you’re not a tech company? Get creative! For example, what if a pizza parlor acquired a tech startup specializing in drone deliveries, making it the coolest dinner delivery service in town? Imagine the PR and social media buzz that could give a small business massive exposure, and the opportunity to expand into new territories.
Whether it’s a wacky idea, a breakthrough in product design, or finding simple but effective ways to solve problems for your customer, innovative technology can be a great way to attract and retain customers. Moreover, new technology can lead to increased efficiency, productivity and profitability within the organization.
How Can I Attract New Customers?
Attracting new customers is a pivotal aspect of business growth. To expand your customer base, start by identifying your target audience and understanding their needs, preferences, and pain points. Utilize market research and customer feedback to refine your products or services, ensuring they align with customer expectations. Create a compelling and consistent brand image that communicates the unique value your business offers.
Strategically engage (not dabble!) in digital marketing strategies, leveraging social media, content marketing, and search engine optimization to elevate your online visibility and connect with a broader audience. Entice potential customers by offering promotions or value-add offers that encourage them to give your business a try. Above all, prioritize building meaningful customer relationships through exceptional service and personalized interactions, nurturing loyalty, and earning valuable word-of-mouth referrals.
By adopting a customer-centric approach and executing targeted marketing initiatives, you can effectively attract new clients and propel your business toward expansion and success.
How Prevent Loss of Market Share?
Loss of market share is one of the most costly mistakes a business can make. It’s futile to generate new customers if you can’t retain them, and earn their repeat business or referrals. Constant vigilance and strategic measures are essential to safeguarding existing customers, and fending off competitors.
- Regularly monitor market trends, customer feedback, and industry developments to identify potential threats early on.
- Continuously invest in innovation to keep products or services relevant and appealing to customers.
- Keep a keen eye on pricing to ensure competitiveness without compromising profitability.
- Stay agile and responsive to changing customer needs, adapting your offerings and strategies accordingly.
- Cultivate open communication with customers to address concerns promptly and demonstrate a commitment to their satisfaction.
Above all, developing trust and relationships with your client base and key strategic partners is the key to growing and maintaining market share.
Why Is Market Share Important for a Business?
Market share serves as a crucial gauge of a company’s competitiveness and overall success within the industry.
A higher market share is indicative of a business’s ability to increase revenue and customers, relative to its competitors. This represents the trust and preference consumers place in one company over others. Moreover, a larger market share often unlocks economies of scale, leading to cost efficiencies and greater profitability. Companies with substantial market share also enjoy the advantage of negotiating more favorable terms with suppliers, thereby optimizing their supply chain and further reducing costs.
Also, a robust market share enhances brand recognition and credibility, attracting new clients and reinforcing customer loyalty among existing ones. As a key performance metric, market share also allows businesses to track their progress over time, guiding strategic decisions, measuring the success of marketing efforts, or giving them an early indicator if the market begins to shift in an unfavorable direction. Ultimately, a healthy market share contributes to the long-term scalability and competitiveness of a business in the dynamic marketplace.
What is an example of market share?
Let’s take an example of a company that manufactures smartphones. We will place it in a hypothetical scenario with two other major manufacturers: Company A, Company B, and Company C.
If Company A sells 40 million smartphones annually, Company B sells 30 million, and Company C sells 20 million, and the total industry sales are $200 million, their respective market shares can be calculated as follows:
Company A’s Market Share: (40 million / 200 million) * 100 = 20%
Company B’s Market Share: (30 million / 200 million) * 100 = 15%
Company C’s Market Share: (20 million / 200 million) * 100 = 10%
The total market size is the sum of smartphones sold by all companies in the industry. These percentages represent the market share of each company, reflecting their share of the overall smartphone market.
What causes market share to increase?
Many factors impact a change in market share.
For example, innovation and differentiation, such as introducing new and improved products, can attract more customers and help gain a larger market share. Pricing strategies, including competitive pricing or offering promotions, may entice customers to choose a particular brand over competitors.
Moreover, exceptional customer service and building strong customer relationships can foster loyalty and retention, leading to higher market share. Market share can also increase when implementing a well-thought strategy for acquiring a businesses within the same industry (i.e., eliminating a competitor and taking on their market share).
Ultimately, any initiative that boosts sales, enhances customer satisfaction, and elevates brand visibility can lead to a growth in market share.
What does increased market share lead to?
Increasing market share has several positive outcomes for a business. It leads to higher revenue and profitability by capturing a larger percentage of the industry’s sales. Achieving economies of scale brings cost efficiencies and improved margins.
A stronger market presence enhances brand visibility and recognition, providing a competitive advantage. Increased market share fosters brand loyalty, encouraging repeat business and word-of-mouth referrals. Moreover, it enhances the company’s bargaining power with suppliers and partners, securing better deals and access to more resources.
Overall, higher market share elevates a business’s position in the industry, unlocks growth opportunities, and contributes to long-term success.