Figuring out your market is one of the most important aspects of business development. A business development professional must figure out the market that a company reaches based on demographics, location, and more. One important metric to monitor in order to figure out your market is market share.
Market share is used to give a general idea of the size of a company in the grand scheme of its market and its competitors. It is a relative measurement against external benchmarks. In order to calculate market share, take a company’s sales over a given period of time, and divide it by the total sales of the industry over the same period of time.
If you want to gain market share, it is easier to do so in a growing market than in a mature market. In a market that has been around for a while, increasing market shares means taking customers away from your competitors. This can be costly to your company, since it involves changing the regular buying habits of your customers.
In a growing market, there are new customers entering the equation, thus making it easier to increase market share in a growing market. These new customers are willing to buy and try new products. Increasing market share typically involves a defined strategy, which the business development professional usually comes up with. The strategy will likely involve expanding distributors and using effective marketing campaigns.
Many enterprises make the mistake of overlooking market share and focusing on internal metrics. Internal metrics like satisfaction, loyalty, leads, revenue growth, margin improvements, recall, churn, and awareness are often measured as if they are the best indication of success. The truth is, internal metrics are often deceiving. The inwardly focused enterprise might be happy with the results, but this means very little if the enterprise is performing badly in comparison to the competition. As a result, a number of large customer-centric enterprises are outdone by smaller challengers.
While market share is very important, it needs to be considered in addition to other metrics. In order to figure out the ultimate value of a company’s market share, units, revenues, and margin also need to be tracked.
Market share truly is the most important metric for judging the effectiveness of a company’s marketing campaigns. It surpasses branding initiatives, CRM programs, advertising campaigns, and any other efforts to generate revenue. Market share allows companies to have a broader perspective and helps them get a leg up on the competition.