Definition

The percentage of a market’s total sales that is earned by a particular company over a period of time is termed as market share.

Description

Identifying the total share of sales a company makes in a particular period and in a specific industry is important for a business segment. It helps to identify the prospects of growth and possibilities of improvement.

By knowing the total sales made by a company over a specified period of time, different patterns and purchase behaviour of the buyers can be observed.

The market share metric gives a general idea of the size of the company when compared to the leading players in the market.

Future Strategies To Improve Market Share

There are several strategies that a business can use to improve its market share, including:

1. Product differentiation: A business can differentiate its products or services from its competitors to attract more customers. This can be achieved by offering unique features or benefits, such as better quality, better performance, or lower prices.
2. Marketing and advertising: A business can increase its market share by investing in marketing and advertising campaigns that target its desired customer segments. This can increase brand awareness and generate more leads.
3. Pricing strategy: A business can use pricing strategies to improve its market share. For example, it could offer discounts or special promotions to attract more customers or implement dynamic pricing strategies that adjust prices based on demand.
4. Expand distribution channels: A business can reach more customers and increase its market share by expanding its distribution channels. This can be achieved by partnering with other businesses, opening new stores or locations, or selling through online marketplaces.
5. Improve customer experience: A business can improve its market share by providing a superior customer experience. This can be achieved by offering excellent customer service, improving product quality, and providing a seamless shopping experience across all channels.
6. Acquire competitors: Another strategy to increase market share is to acquire competitors. This can eliminate competition and gain access to their customer base, products, and expertise. However, this strategy can also be risky and expensive.

How is market share used by the companies?

Market share is used by companies for several purposes, including:

1. Competitor analysis: Market share information is used by companies to analyse their competitors. By understanding their competitors’ market share, companies can identify areas of opportunity and potential threats to their business.
2. Sales forecasting: Market share data is used by companies to forecast sales and revenue. By tracking their market share over time, companies can project how their sales and revenue will grow or decline.
3. Pricing strategy: Market share information is used by companies to develop pricing strategies. For example, companies may adjust their prices based on their market share to maintain profitability and competitiveness.
4. Product development: Market share information is used by companies to guide product development efforts. By understanding which products or services are performing well in the market, companies can focus their resources on developing or improving new products.
5. Marketing and advertising: Market share data is used by companies to inform their marketing and advertising campaigns. Companies can increase their market share and revenue by targeting customer segments not currently using their products or services.
6. Investment decisions: Market share data is used by investors to make investment decisions. By analysing a company’s market share, investors can assess the company’s growth potential and overall performance in the market.

Benefits of Knowing the Market Share

Knowing your market share can provide several benefits, including:

1. Understanding your competitiveness: Knowing your market share helps you understand how well your business competes in the marketplace. It indicates how well your products or services perform compared to your competitors.
2. Identifying growth opportunities: If you have a low market share, it indicates room for growth. By identifying the areas where you have a lower market share, you can focus on those areas to capture more market share and increase your sales.
3. Benchmarking against competitors: By knowing your market share, you can benchmark your business against your competitors. This allows you to identify areas where you are outperforming them and areas where you need to improve.
4. Making strategic decisions: Market share information can help you make strategic decisions about pricing, advertising, and product development. For example, if you have a high market share, you can increase prices without losing customers. Alternatively, if you have a low market share, you may need to lower costs to attract more customers.
5. Improving customer satisfaction: By understanding your market share, you can better understand your customers’ needs and preferences. This can help you tailor your products and services to meet their needs, improving customer satisfaction and loyalty.

Example

According to recent market research reports, as of 2022, Samsung has a market share of around 22%, Xiaomi has a market share of about 21%, and Vivo has a market share of around 19%. Other players in the market, such as Oppo and Realme, have smaller market shares.

This information is essential for these companies to understand how they perform in the market compared to their competitors.

For example, if Samsung’s market share declines, it may need to adjust its pricing or marketing strategy to remain competitive.

Similarly, if Xiaomi’s market share is increasing, it may want to invest more in advertising or new product development to maintain its momentum.

This information is also important for investors, as it can help them evaluate these companies’ growth potential and profitability. Overall, understanding market share is crucial for companies in India.

FAQ

What is market share?

Market share is the percentage of a market’s total sales or revenue earned by a particular company or brand.

Why is market share significant?

Market share is substantial because it provides companies with insight into their market performance, competitive position, and growth potential. It is also a critical metric investors use to evaluate companies and make investment decisions.

How is market share calculated?

Market share is calculated by dividing a company’s total sales or revenue in a particular market by dividing it by the total sales or revenue of the entire market.

What are some ways to increase market share?

Strategies to increase market share can include product differentiation, marketing and advertising, pricing strategies, expanding distribution channels, improving customer experience, and acquiring competitors.

How can a company use market share information?

Companies can use market share information for competitor analysis, sales forecasting, pricing strategy, product development, marketing and advertising, and investment decisions.

What are some limitations of market share as a metric?

Market share does not consider profit margins, customer satisfaction, or brand loyalty. It also needs to provide information about the market size or potential for growth.

Therefore, companies should use other metrics in conjunction with market share to gain a complete picture of their performance in the market.