In this article we will discuss how to calculate market share which is a tool used to compare you to others int the industry.
Market share refers to a company’s portion of sales within the entire market in which it operates. It is one of the primary indicators companies use to measure how well they are doing versus competitors.
Generally, it is often better to have a high market share. If a company has a high market share, they are well-established in an industry and have likely achieved some level of success
How to Expand Your Market Share.
Lower prices. A great way to compete in your industry is to offer low prices because most consumers tend to prefer lower-cost products.
Develop new products and features. New products and features attract new customers. They make new purchases and, in turn, contribute to higher profit margins and larger contributions to overall industry revenue.
Improve customer retention. You can inspire customer loyalty providing exceptional experiences to the current customers. Loyal customers are more likely to make repeat purchases, which increases your business revenue and contribution to total industry revenue.
Increase brand awareness. Becoming a household name and the preferred brand in an industry will help increase your market share.
Expand customer base. When you expand your customer base to include new demographics, you unlock greater business potential.
Importance of Market Share.
Market share is a key indicator of a company’s competitiveness in its industry. The more market share a company has, the more likely it’ll have a higher profit margin.
A big market share can boost business and lead to price leadership in the market, whereas the competitors will be more likely to follow the company in terms of price points that the leading firm shall establish
Market share informs investors of how successful a company has been compared to its competitors. If a company has a high market share, it is a successful company that has secured customers, likely has a recognizable brand, and it’s more likely to be a less risky investment.
Formula to Calculate Market Share.
Company’s sales is the amount a company receives from selling goods or providing services to its customers and clients.
Entire market share is the number of products or services that a company sells compared to the number that other companies sell.
Example:
A toy manufacturing company had total revenues of $20 million, and the toy manufacturing industry had total revenues of $200 million over one accounting period. Determine the company’s market share.
Therefore, the company has a 10% market share.
