Reviewed by Aug 27, 2020| Updated on
Market share is the percentage of revenue from a market held by a given organization. In other words, it is the overall revenue of business about the market. This is usually measured over time, splitting it into annual or quarterly revenue, and divided by national and regional rates. Relative to the overall industry and its rivals, market share gives a firm an indication of its sales.
Purpose of Market Share
Market share is considered to be a primary measure of competition in the industry, that is, how good a firm is performing over its rivals. This measure, complemented by adjustments in sales income, allows executives to evaluate both primary and selective competition in their market.
In other words, it enables them to determine not only overall business increase or downturn but also patterns in consumer preference among rivals.
Impact of Market Share
Changes in market share have a more significant effect on the company's success in mature or cyclical industries where growth is small. In comparison, shifts in market share in development sectors have less effect on businesses.
In these industries, the total pie is growing, so companies can still be growing sales even if they are losing market share. Sales growth and margins impact stock output for companies in this situation more than other factors.
How to Increase Market Share?
Innovation is one way a company can raise market share as in the customers will purchase the product from the new company when it introduces a new product, which its rivals have not yet delivered.
Some of those buyers are loyal customers, which contribute to the market share of the product and reduces market share for the earlier brand from which they moved.
Companies secure their existing market share by improving consumer relationships by stopping current customers from jumping ship when a rival rolls out a hot new bid. Better still, companies will gain market share using the same basic strategy, because happy consumers also talk to friends and family who then become new customers about their positive experiences.
Increasing market share by word of mouth raises the sales of a company without a concomitant rise in marketing expenses.