A company’s market share represents its hold in the market. It is determined by calculating the percentage of total sales a company manages in the market. It is an indicator of a company’s profitability. It shows whether or not a company is putting in enough effort and using essential tactics to capture the consumers’ interest. Research shows that companies with more than 40% market share are twice as profitable as those with just a 10% market share. A company’s market share plays a key role in determining its reputation and impacts stock market performance.
In this article, we have shared the various benefits of gaining market share, methods to increase it and ways to prevent its decline. Read on to find out!
Key Benefits of Gaining Market Share
Here is a look at the key benefits of gaining market share:
1. It helps increase a company’s customer base, comprising existing and new customers.
2. As a company’s consumer base increases, so does the demand for its products. An increase in product demand means a rise in sales and greater revenue generation. It has been observed that with every 10% rise in a company’s market share, its return on investment increases by 5%.
3. An increasing demand for a company’s products calls for an increase in production. By manufacturing goods on a large scale, businesses can lower the expenditure involved in producing a single unit. The cost decreases because of the economies of scale, benefitting the company.
4. Gaining market share helps build goodwill. In addition to attracting potential customers and increasing sales, such companies also draw the attention of skilled professionals. This helps create a team of knowledgeable, experienced employees who contribute to the business’s success.5. Another benefit of gaining market share is that the company comes into the good books of suppliers. Such businesses are likely to get better rates from suppliers.
Proven Methods to Increase Market Share
Before understanding effective methods of increasing a company’s market share, let us know how this share is calculated. The calculation is simple and can be done using the formula below:
· Market Share = Company’s sales/ total industry sale * 100
Suppose a company makes an annual sale of INR 1,00,000, and the total number of sales in its industry in that particular year reaches INR 50,00,000. The company’s market share would be:
· 1,00,000/5,00,000*100 = 1/50* 100 = 2%
A business must maintain its market share. However, merely maintaining the share may not sustain its standing. To grow in the industry, it is important to increase the market share. This is necessary to stay ahead of your competitors. But what can be done to increase market share? Here are a few ways:
1. Improvise and Innovate
Businesses can maintain relevance and increase market share by improving products and services to match the latest consumer demand. Advanced technology can help improve and upgrade existing products and services. Innovation in the field also draws consumer attention, encourages them to try your offerings, and to return for more. Trying innovative ways of marketing the products also helps in this direction.
2. Appropriate Pricing
One key consideration while making a purchase is its pricing. Online shopping enables customers to compare and contrast the rates of different items. This is why pricing products appropriately has become more essential than ever. It is critical in determining a company’s popularity among the masses. Different pricing strategies, such as value-based, net, and penetration pricing, can be used to optimise pricing and attract customers.
3. Effective Marketing
Effective marketing campaigns help draw attention to the business. They attract potential buyers, often leading to an increase in the conversion rate. Running interesting marketing campaigns at frequent intervals keeps the brand on top of the customers’ minds. It is equally important to run the campaign on different platforms, especially the ones that resonate with the target audience. It has been observed that buyers tend to consider products by brands that are advertised well and often purchase them.
4. Cultivate Customer Relationships
Building cordial relationships with customers and maintaining them is crucial for a business’s success. It can be done through different channels, including social media, e-mail, and physical touch points, such as retail stores and brand events. Being attentive to their concerns, resolving their issues quickly, and offering proactive help builds customer connections. In a survey, 83% of the customers mentioned that they became more loyal to brands that promptly respond to their queries and resolve their complaints. Furthermore, ensure quick and efficient deliveries to your customers to satisfy them. Shiprocket’s SR Quick is an ideal choice for deliveries nationwide, serving over 24,000 pin codes. This ultimately helps increase their market share. Thus, any opportunity to engage with and assist customers should not be missed.
5. Hire Skilled Staff
A talented and experienced workforce is capable of handling the work efficiently. They may demand a higher remuneration; however, their value is often worth the investment. Moreover, the company can reduce training costs by hiring professionals who are well-versed in the work. They do not just work on their assigned tasks but may even focus on improving the existing systems by sharing novel ideas. This can contribute to the company’s growth.
6. Enhance Market Position through Acquisitions
Big brands increase their market share and build authority in the industry by purchasing a large share of their competitors’ business or buying them (one or more) out completely. Acquisition is a quick way to increase market share but involves huge capital. It should also be done after carefully considering its various pros and cons.
How to Stop Market Share from Slipping
Building a foothold in the market requires substantial effort; however, losing it can happen quickly. Here are a few tips to prevent a decline in the market share:
· Keep a close watch on the company’s performance and that of the competitors. This helps understand the business’s position in the market. The management can take necessary action to maintain the market share if it notices a potential decline.
· Keep pace with the growing competition by enhancing your product and service quality.
· Prioritise customer satisfaction to win their trust and encourage repeat business.
· In addition to remunerating the employees well, management should create a healthy work environment, provide incentives and may even offer flexible work schedules. This helps retain the employees, boosts productivity and prevents the market share from declining.
Conclusion
A growing market share translates to an increase in the company’s revenue. It is also indicative of a company’s reputation in the market. Businesses must aim to achieve greater market share to build a strong foothold. Many strategies can be used to achieve this goal. Employing skilled and dedicated employees, ensuring customer satisfaction, creating effective marketing campaigns, and offering high-quality products are among some of them. By leveraging these tactics, businesses can increase their market share year after year and outshine their competitors. Online companies can leverage Shiprocket Checkout to simplify their checkout process and boost conversion rates.
