What is Market Share?
The term “market share” refers to a company’s share, or portion, of the market of which it is a part. The different companies that comprise a market must, by definition, share in the overall sales. Every industry directs its marketing to a specific target market, and each company that fits within that industry can only sell its goods or services to a percentage of it. An increase in market share can be seen to indicate that a company has a competitive edge within its market. Since market share is an important value in determining the relative success of any given company, it becomes a way for companies to evaluate their upswings and downswings, as well as allowing them to better identify trends as they occur in the behavior of their target consumers.
Market share is a useful tool in determining the scale and importance of a company within a larger sector. When a company is able to maintain a certain level, or demonstrate an increase in market share, that can be an indication that its marketing strategies have been successful. This in turn can lead to more informed decisions in the future, in terms of pricing, developing of new products, broadening the demographics of its target consumers, and launching new advertising campaigns. Market share, however, should not be the only determinant when it comes to evaluating a company’s performance. As PayPal CEO, Dan Schulman has observed, “When you focus on validation and market share, you win some and you lose some. When you focus on the needs of your customers and help them achieve their dreams, you win every time.” (https://fastcompany.com)
Setting Market Share Goals
There are a number of considerations for a company to take into account when it comes to setting market share goals. Not every goal would work, or even prove to be reasonably practical, for every company. However, there are some basic techniques that can be applied across the board. These can be loosely assembled into three categories: building, holding, and harvesting. Building strategies focus on establishing new approaches, such as introducing innovative products and coming up with new advertising campaigns, whereas holding strategies are more concerned with the maintenance of a company’s previously established market share. Harvesting is a slightly different approach, by which a company may increase a level of short-term cash flow through an actual decline in market share.Some questions a company might ask itself are: How strong is the competition? What resources can we afford? Are we willing and able to gamble on future results?
The overall consensus seems to suggest that determine market share is worth the effort. “The companies without the will or interest to accurately calculate their true market share need to understand the importance of this metric and the peril they place on themselves when they operate without this guidepost.” (https://www.buxtonco.com)
Market Share Benefits
Market share demonstrates how successful a company is, as compared to other companies in the same field. Having this information can be a great advantage in terms of optimally directing tactical strategies. It can provide a compass of sorts, by which a company can navigate more effectively among its counterparts, through what can often be a ruthless competitive arena. Market share provides a decided advantage to companies making use of it, enabling them to measure such things as comparative pricing, the effectiveness of advertising, and how consumers view new and existing products.
Some marketers consider market share to be one of the most important evaluation tools a company might have at its disposal. It has been said that “…one of the main determinants of business profitability is market share. Under most circumstances, enterprises that have achieved a high share of the markets they serve are considerably more profitable than their smaller-share rivals. This connection between market share and profitability has been recognized by corporate executives and consultants.” (https://hbr.org)