Gaining market share has been the primary aim of several companies across different industries. Market share can be a crucial determinant of the success of your business. However, the type of business that you are in will determine the impact that market share can have on your sales and stock performance. Moreover, understanding your market share can provide you with insight into your position amidst your competitors. It can help you analyze and further take action to improve your marketing efforts and further boost sales and profits for your business.
What is market share?
In simple terms, market share is the amount or the portion of a particular market that your company has earned. In other words, it is the number of total sales generated by your particular organization in your industry. It is usually calculated in 3 simple steps. First, identify the time period over which you want to calculate the company’s market share. Next, for this period of time, calculate your company’s total sales. Then, calculate the total sales of the industry that your company is associated with. Finally, divide your company’s sales across a certain period of time by the total sales of the industry across the same period of time.
How can market share impact your business?
Market share is a crucial component to several businesses as it has major areas of impact on the company’s growth. To begin with, having a higher market share can allow your company to scale vastly and also increase profits. In addition, more market share directly translates to more sales in the company. The increase in sales is most likely driven by an increased customer base.
Having more market share can also enhance your reputation in the market. This will further increase your customer base and help boost sales. Finally, you can leverage more bargaining power if you have a relatively higher market share. Once a company achieves great market share, bargaining and negotiating with suppliers and distribution channels can be easier.
How to improve your market share?
Improving your market share can come with an increased effort and investment in the right direction. If you have been looking to leverage your assets to gain more foot in your industry, look no further. Here are 5 ways in which you can boost your market share.
One of the most effective share market tips is to grab the attention of several customers and thereby improve your market share is to innovate new products and features. With the right type of product features that come with innovation, you could gain a cutting edge over your competitors. While it is important to keep up with the current industry trend and standards, innovating to solve customer problems is even more important.
Pick your niche
As a business, it can be challenging to stick to a niche and not spread out across other segments. When your company sticks to a particular niche and has key deterministic factors, customers tend to set you apart from your competition. This not only helps with relating to customers better but also increases reach to certain customers.
Increase customer loyalty
One main pathway to increasing customer loyalty is by maintaining the standards of your products or by increasing their quality. By increasing the strength of your customer loyalty, you can also preserve your existing market share as your customer will continue to come back to your product or service.
Consider an acquisition
Acquiring a company is a space of your potential growth and interest can be very rewarding when it comes to sales as well as market share. For instance, Microsoft acquired LinkedIn as they wanted to expand their reach in the social networking space. This not only helped them gain market share but also their reach to several potential customers. However, keep in mind to choose the right company to acquire.
Improve customer engagement
The best way to understand customer needs is by interacting with them. One of the easiest ways to reach customers is through social channels. Several companies send out newsletters that contain surveys to receive customer feedback and inputs. However, you could also leverage social media to put up polls, questions, and votes to better understand your customers. In addition, engaging with your customers provides them with an increased sense of trust and would thereby encourage them to stay loyal to your brand.
Share trading tips based on a company’s market share
The impact that market share can have on your company’s stock performance depends on the type of the company. If the company is in the growth industry, market share would not impact stock performance as much. However, for established, mature, or cyclical industries, market share can be a key component to growth. This differentiation is considered the most popular stock trading tip for many investors and traders.
Let’s consider the scenario of growth companies. The total number of players in the growth company industry keeps increasing by the day. So, the number of competitors rises consistently. In such a scenario, as the total pie keeps increasing, market share is not an accurate indicator of total sales. The main reason being that there can be instances where the sales of the company can increase while the market share may not reflect the same. So, for growth companies, the performance of their stocks is more reliant on the growth of their sales rather than their market share.
In contrast, when it comes to cyclical industries, market share is a very important and prominent aspect. Market share in these industries is typically determined by components like sales, earnings, and margins among others. There are several economic factors that contribute heavily to these components of market share. So, companies in this industry shell out large sums of money as investments in marketing efforts. Gaining market share is of crucial importance as it would primarily determine the stock performance of these companies.
With all of these mentioned strategies, your company can increase its market share drastically. However, depending on the type of establishment, market share can have varying effects on the company’s stock performance. Although, it can always help to have a larger market share as more customers translate to increased sales and further increased revenue.