As you probably know, a market is just the gathering of buyers and sellers to purchase or sell their products or services.
Market share refers to a business’s participation in a given market’s total sales. In other words, the percentage of the market a business holds. To calculate a market share, you need to have data points like the total revenue generated by the business and the total revenue generated for the whole industry in the area, the units sold by the company, or the total units sold by the entire business in the area.
For example, let’s supposed that the total revenue generated by the Beer industry in the United States in 2022 was USD 165 billion, and ABC Beer generated revenue was USD 54 billion. Therefore, we can say that ABC Beer holds a market share of 33%.
Market share is a metric to measure the health of a business. Following the previous example, if ABC Beer holds a 33% market share of the beer industry in the USA this past 2022, and by mid-2023, this percentage goes down to 25%, this should trigger an alarm to any Business Intelligence / Analytics team to find the causes of this importance decrease. For example, a new competitor entered the market with a very aggressive price, a distribution problem, or an issue with the brand name that has negatively impacted consumer sentiments towards ABC Beer products.
How to increase market share?
- Innovation. Introducing new products to the market, improving production and distribution processes, and new technologies.
- Pricing strategies. Offer better prices than competitors, product or service bundle discounts, sales events, etc.
- Customer Retention Strategies. Offer a reward program for customers, and newsletters to inform customers about sales, coupons, discounts, etc.
- Promotion and Advertising. Top-of-the-funnel digital and traditional media campaigns to increase brand awareness, remarketing campaigns, social media advertising, etc.
- Competitor’s acquisition. Acquiring a competitor can help increase market share also establish an alliance with companies that offer related products.
Why is market share so important?
An increase in market share can allow a business to increase its revenue, boost total sales, improve the customer base, and customer loyalty, and dominate the industry. As I mentioned before, market share is an essential metric for businesses because it gives you a reference of how your business is doing compared with your competitors. Also, allow executives to identify trends, market growth or decline, and market opportunities.
Furthermore, it can help to establish pricing strategies and promotions, advertising campaigns, and positive consumer sentiments towards your products and even help to make decisions about opening or closing new branches, discontinued products, etc.
If you are planning to open a new business, a good approach is to study the total market value you intend to enter and who are the key players in the industry. This information can give you an idea of what to do and make planning decisions.
