Develop a Market Share Strategy
A powerful marketing strategy is to increase your market share through your marketing activities. The bigger you are in comparison to your competitors, the more profitable you’ll be. Scale helps. That’s why trying to be relatively big is a good idea.
In essence, that means taking some business from your competitors. Market share is, very simply, your sales as a percentage of total sales for your product category in your market (or in your market segment if you use a segmentation strategy). If you sell $2 million worth of shark teeth and the world market totals $20 million per year, then your share of the global shark teeth market is 10 percent. It’s that simple. Or is it?
To help you comprehend how increasing your market share can be beneficial for you and your business, the following sections provide some basics on this strategy and how you can implement it.
Choose a unit
Before you can completely determine your market share, you must know which unit (what you’re measuring sales in) you’re going to reference. Dollars, pesos, containers, or grams are fine — as long as you use the same unit throughout. Just pick whatever seems to make sense for your product and the information you have access to.
Estimate market share
To effectively increase your market share, you must have an accurate picture of how large your market is and what your current share of it is. Take a look at this simple method for estimating market size and share (you can even sketch it out on the back of a napkin if you haven’t the time or money for fancier approaches):
Estimate the number of customers in your market.
For instance, guess how many people in your country are likely to buy toothpaste or how many businesses in your city buy consulting services.
Estimate how much each customer buys a year, on average.
Does each customer buy six tubes of toothpaste? Fifteen hours of consulting services? You can check your sales records or ask some people what they do to make your estimate as accurate as possible.
Multiply the two figures together to get the total size of the annual market and then divide your unit sales into it to get your share.
Know your competitors
So what if your competitors have more market share than you? Don’t fear them; use them instead! Study your closest and/or most successful competitors to figure out how you’re going to gain market share. The better you understand your competitors, the more easily you can take customers away from them.
Ask yourself what your competitors do well, how they take business from you now, and what new initiatives they’re trying this year. Talk to customers, suppliers, distributors, and anyone else with good knowledge of your competitors’ practices and gather any online information about them from their websites.
Also, collect their marketing materials and brochures and keep track of any information you come across on how they market. For example, if they’re picking up good business by having a booth at a trade show you don’t attend, consider getting a booth next time to make sure you’re able to compete against them there.
Also find out what your competitors do badly. Those things are the chinks in their market share armor where you can easily succeed by being better!
Study market trends and revising if need be
Market share gives you a simple way of comparing your progress to your competitors from period to period. If your share drops, you’re losing; if your share grows, you’re winning. It’s that simple.
Consequently, most marketing programs are based at least partly on a strategic market share goal, which is the percentage of sales you want to win during a specific period, such as a year. For example, you can say, “Increase share from 5 percent to 7 percent by introducing a product upgrade and increasing our use of trial-stimulating special offers,” which is a clear goal.
You also need to study the market and see how your products compare year to year and against your competition. The postmortem on last year’s program should always be based on an examination of what market share change accompanied it.
Whether you make share gain the focus of your marketing program, at least keep it in mind and try not to lose any share.