Understand what market share is and how important it is to know your market share – WAU
Market Share is a percentage that corresponds to the relevance of your company to competitors in the industry in which it operates. It can represent the market value, the portion of an audience that prefers that brand, the volume of sales and other aspects that you check below.
For more innovative What a company is, it is to be expected that it has competitors with those who compete for a larger share of the market. This participation, also known as Market Share, represents – among several particularities – the portion of the public that your business was able to conquer, which is directly proportional to the revenue generated by that market share.
Do you want to know more about the importance of the Market Share concept, understand how to calculate it and also check out tips on how to increase this indicator for your company? See it all below!
What is Market Share?
We can understand the idea of market share under several aspects. Whichever parameter is used, the objective is to determine, by means of percentages, the how much companies within the same field of activity stand out from other.
If we imagine the potential market of a company in a certain sector as a pizza, Market Share would be the slice of that audience that consumes its products and services. In this case, we are dealing with the brand penetration, an important data to plan and evaluate the company’s Marketing actions.
We can also assess the market share from the point of view of sales volume or even the number of users, If the company operates in the digital assets industry.
Another way of looking at Market Share is as a reflection of the operation size the company before its competitors, something that is closely linked to the brand value, and the company itself in the market.
To give you an idea, in the search engine industry, Google has a market share of around 92%, while Bing has approximately 3% and Yahoo has almost 2%. This says a lot about the strength of Google, which is the preferred search engine in the vast majority of countries and has considerable dominance over its opponents.
Why is Market Share so important?
By monitoring how this share increases or decreases over time, organizations have a good indication of whether their Marketing campaigns and actions related to strategic planning are having the desired effect or not.
While the increase in Market Share may be a good sign, its decrease may mean that action is needed to contain the competitive pressure.
Analyzing the business from this point of view is a way of understanding how it is performing, taking into account the ecosystem of other companies. When we evaluate growth only by internal indicators, giving an increase in net profit from one quarter to the next, for example, we have a comparison factor between the results of the organization itself.
When calculating and examining Market Share on a regular basis, we find incentives to focus on company goals or to create new ones, and we have an extra incentive to look for new ones opportunities or identify where the weaknesses of the company.
Even companies with greater market share tend to enjoy competitive advantages, Such as the power to negotiate with suppliers and the credibility to establish partnerships.
How to calculate this indicator?
Now let’s look at three ways to calculate Market Share.
If we cross the internal customer base data with demographic studies and statistics published by bodies such as the IBGE, it is possible to have a notion very close to the company’s Market Share.
Let’s say that an organization sells products dedicated to women aged 20 to 34 and operates in a region that has 200,000 women in this age group. If the company has 10,000 registered customers, we can divide this number by the number of potential consumers and we will reach a Market Share of 5% (10,000 / 200,000 = 0.05 = 5%).
Market Share = Customers won by the company / Potential customers in the company’s area of operation
Calculating Market Share according to sales may seem simple, because we only need to divide the company’s revenue by the total revenue of its sector of activity in the period.
Market Share = Company revenue / Total revenue of the most relevant companies in the sector
The problem is that, depending on the industry to which it belongs, this information will hardly be available.
Here, you may need to make estimates or order studies to achieve a minimally accurate calculation.
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The market value calculation follows the same reasoning as the previous criteria.
Market Share = Market value of the company / Total market value of the most relevant companies in the sector
If your company is valued at R $ 50 million and in your sector there are only four more relevant competitors, priced at R $ 25 million each, your Market Share will be: 50 / (50 + 25 + 25 + 25 + 25) = 50 / 150 = 0.33 = 33%.
Brand penetration is already a more subjective factor, which will require tools worthy of market research. There are ways to carry out a study of the type promoting polls and interviews with consumers on their own, but the ideal is to hire this service from a specialized company.
In this case, the calculation of Market Share becomes more complicated, since it will involve margin of error and statistical concepts that are already out of focus of the post.
How to increase your company’s market share?
The time has come to check out important tactics that companies use to increase their Market Share.
Create new Marketing campaigns
There are companies that offer quality products, but that fail to disclose what they have to add to the market. Here, Digital Marketing strategies can be excellent allies to attract new customers and increase brand awareness.
With relatively low initial investments, it is already possible to observe an interesting return. When identifying the most appropriate channels, we achieved even more satisfactory results.
Invest in innovation
Develop innovative products and services it is another way to get part of your competitors’ share for your company. Remembering that innovation is not exclusive to startups or technology organizations.
With innovation management measures and the maintenance of an organizational culture focused on creative problem solving, important advances are already being made in this regard.
Improve customer relationship
Provide good customer service and a after sales that demonstrate how much the company values its consumers is a way of promoting the loyalty of these people. As a result of this loyalty, they will give preference to your brand and still recommend your company to others.
We saw, then, that Market Share has a number of aspects. Knowing and monitoring it is a way of knowing if the business evolution is going as planned or needs some adjustment, in addition to being a real opportunity to learn how it is positioned in the industry in which it operates.
Do you want to know other tips on how you can develop your business and thus achieve a more advantageous market share? Download the Hypergrowth microbook now!