Market share is the ratio of total sales developed by a company in an industry. Market share is figured by dividing the company’s deals by the industry’s whole deals simultaneously. Market share, very merely, is the rate of outcome, service, or software in a specific area, estimated by deals. Market share is a vital indicator that a business can evaluate the efficacy of any conceivable revenue-generating action, such as marketing campaigns, brand promotion programs, or customer relationship management programs.
Market share gives the company how big, vital, or essential business is in a particular area. The company can calculate its share by dividing companies total sales by the entire department or market they sell.
If a company keeps its share for a long time, its revenue will grow in line with its competitors. However, the increase shows faster, market-leading revenue gains. This indicator is used to provide a general understanding of the size of a company relative to its market and competitors.
Why does market share matter?
Market share is a valuable indicator that provides far more insight than the relative size of an organization in the market in which it operates.
Understanding product manager responsibilities in the marketplace also shows how successful business is relative to competitors and how effective Company marketing, advertising, and new product development are.
Calculation Formula of Market Share
Market share is calculated as follows.
Impact of market share
- Economies of scale:
The growth in the company’s demand stake can promote the company to perform on a more comprehensive ranking and enhance the profit margin. It also helps companies form cost advantages over competitors.
- Increase sales
- Increase customer base
The increase in market share helps to improve the reputation of companies. A good reputation, in turn, helps sales and expands the customer base.
- Leading industry
As market share grows, a company increases its dominance of the industry in which it operates.
- Increase bargaining power
As market share grew, a company began to dominate an industry. As the dominance of the industry increases, companies can exercise certain powers, such as greater bargaining power. The company is enjoying the upper hand and negotiating favorably with suppliers and distribution channel members.
How to Gain Market Share
Companies looking to increase share have several options. They can attract new customers by marketing and advertising, develop new products for the market, reduce prices to suppress competitors or increase the size of target markets by attracting new population groups.
How to increase market share?
Innovation is an excellent way to increase market share. Innovation can take the form of product innovation, production method innovation, or simply introducing new technologies that competitors have not yet provided to the market. A company can gain more advantages than its competitors and dominate the industry through innovation.
Strengthen customer relationships
By strengthening existing customer relationships, companies can protect their existing markets and ensure that intense competition does not lose their existing customer base. It also increases customer satisfaction, which helps increase the customer base through word of mouth.
Advertising is an expensive and effective way to increase market share. Advertising is a great way to gain more advantage over competitors in a competitive market.
Investors and reviewers carefully observe the growth and reduction in market share as this may indicate the comparative competitiveness of a company’s outcomes or benefits. A company with a growing market share will grow its revenue faster than its competitors.