What Is Market Share And How To Increase It In Business
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Market shares refer to the percentage or a portion of total market sales that a company or an organisation holds in that market. Learning about these types of shares can equip you with the knowledge related to the company's growth. It can also help you better understand the company's competition and consumer loyalty. In this article, we explore what market share means, discover its impact on companies and find out how can the companies increase it.
What is market share?
A company's market share, also known as a share of the market, is its percentage share of total sales of products or services in the specific domain that the business operates in. A company can measure it annually or at certain intervals, like quarterly. These shares for a company may indicate the product preference of consumers over other similar products in a market. High shares show that the company has higher sales than its competitors and attracts more loyal customers and its products or services.
How companies use market shares for growth
A company may use its market share in several ways to boost growth. For example, by possessing higher shares, the company may attract market analysts' favourable views, resulting in higher investor confidence and enhanced capital growth. Analysts and investors often monitor market trends and evaluate how different companies perform. When a company holds high shares, it typically means that the company is growing at a greater pace than its competitors. This growth encourages both retail and institutional investors to invest further in the company's expansion.
When companies have high shares, they can also aim at generating stable revenue growth, which can result in greater profitability. Large companies often look for ways to maximise their profits through increased advertising spending, fixing competitive prices or launching new products or services. They may also try to expand their shares by appealing to a new customer demographic.
What is the impact of market shares?
Before understanding the impact of these shares, it is important to learn about cyclical and non-cyclical companies. The growth of cyclical companies can depend on the health of an economy or specific business seasons, like in the case of the hospitality sector. The companies that perform well irrespective of varying economic cycles or specific business seasons are non-cyclical companies, like fast-moving consumer goods (FMCG) companies.
The economic fluctuations usually have a greater impact on cyclical companies and may result in negative effects on companies that do not hold large shares. This is primarily because companies with a smaller share often spend larger capital on operations, including advertising and promotions. The impact of shares on non-cyclical companies, also known as growth companies, is smaller because of the strong demand for products or services that they offer.
How to calculate market share
You may use these steps to find out a company's share:
1. Determine a fiscal period
Selecting a fiscal period is the first step you may take to calculate a company's share. Identifying the fiscal period may involve selecting a fiscal quarter, a year or a range of years. Different companies have different preferences for determining the time frame for their shares calculations.
2. Calculate the company sales
After selecting the fiscal period, you may start by calculating the total sales the company has made in the selected period. Larger companies may have expansive product lines covering multiple industries. In this case, you can calculate these shares individually for each product line instead of performing the calculation based on the company's total sales.
3. Calculate the industry sales
The third step is to determine the total sales the entire market has made in a given fiscal period. Often, this information is available through market research reports and various industry publications. If several large businesses dominate an industry, you can combine their sales to calculate total market sales.
4. Divide the company sales by the industry sales
Divide the company's sales by the industry's sales. This calculation results in a decimal number, which you can convert into a percentage by multiplying it by 100. For example, the total sales of a company in a selected fiscal period is ₹10,000 and the total sales of the industry in the same fiscal period is ₹1,00,000. According to these numbers, the company's revenue share is ₹10,000 divided by ₹1,00,000 or 0.1 multiplied by 100, which equals 10%.
Methods to measure these shares
Here are the two methods to measure these shares:
Each distinct product or service offered by a company is a unit. The total units sold by a company relative to the total units of the same product or service sold in the industry are the unit share of the company. For example, 100 units of a product sold by a company within an industry that sells 1,000 units of the same product in a selected fiscal period gives the company a 10% unit share.
A company's revenue is units sold in a fiscal period multiplied by the price per unit. The total revenue a company generates relative to the industry's total revenue in a given period determines the company's revenue share. For example, a company revenue of ₹5,000 over the industry revenue of ₹20,000 in a fiscal period gives the company a 25% revenue share.
How to increase these shares
Here are a few ways through which companies can increase their shares:
1. Stay relevant
Staying relevant in a dynamic market with diverse products and services is essential. To remain relevant in a market, a company can focus on innovation that appeals to its customers. This may enhance customer loyalty alongside attracting new customers. A company may also ensure that it takes feedback from its customers and changes its products accordingly, delivering an excellent customer experience.
2. Target the right audience
Often companies promote their products to a large number of people, which makes their advertising generic. This strategy helps them reach only a few customers who may be genuinely interested in their product or service. Targeting a niche customer segment allows a company to direct its marketing efforts to the specific needs of that demographic segment and, at the same time, save significantly on marketing and advertising.
3. Build a unique brand identity
In an extremely diverse market, having a unique brand identity may prove to be rewarding. This plays an important role in building higher shares since a company can attract the attention of customers who are more likely to buy from them than their competition. To build a unique brand identity, a company may conduct in-depth market research to identify what appeals the most to its target audience and incorporate the learnings in its brand-building efforts.
4. Prioritise existing and new customers
Once a company has gained a solid customer base, it may retain it through various customer-oriented schemes and benefits. Such strategies may strengthen trust between the company and its customers. Prioritising the existing customers alongside attracting the new ones can help a company retain its customer base. In addition, companies can use personalised communication tools like marketing emails to establish communication with their customers and remain approachable.
Top business and finance jobs
You may perform market calculations in many financial or business jobs that may add to a company's share. Here are some top careers options that may require you to possess the knowledge of these shares:
National average salary: ₹15,61,039 per year
Primary responsibilities: A director of sales is responsible for leading and managing varied sales functions with an emphasis on establishing long-term and value-based customer relationships. They understand and interpret sales strategies for their team to perform efficiently. They also analyse market information by employing sales systems and executing strategies to maximise the company's revenue.
National average salary: ₹9,05,679 per year
Primary responsibilities: A product marketing manager designs, manages and executes a company's product marketing and communication strategies. They coordinate with different departments to generate leads and make the company's marketing plans effective. They also communicate with clients through creative marketing strategies to tell them about new products or services.
National average salary: ₹14,759 per month
Primary responsibilities: A market research analyst conducts extensive research to ensure the comprehensiveness and accuracy of data across categories of products within the company network. They are in charge of creating and analysing reports on various brand subjects. They also combine knowledge of marketing channels with research findings to assist marketing teams in formulating profitable marketing strategies.
Salary figures reflect data listed on Indeed Salaries at the time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location.
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