One of the most important indicators of the work of a modern enterprise is, of course, market share. it indicator of its competition with other companies, attachment to it of a stable category of consumers.
What is market share in marketing?
Market share is description of the position of an individual company in the market relative to its competitors. This indicator is expressed as a percentage of the company's sales of goods to the total market sales of goods of the same category. It happens that the sales volume of a particular category of goods in the whole market may not be known, then it is expressed as a percentage relative to:
- regarding sales of nearest competitors;
- relative to a leading competitor, leader.
Market share is determined by two methods:
- in units of goods;
- in monetary terms.
How to calculate
The indicator can be calculated using a fairly simple formula. To do this, divide the volume of goods or services sold by the enterprise by the total sales of competitors and multiply by 100%. Both volumes can be indicated both in monetary terms and in units of production. The higher the figure, the higher company market share. To calculate this indicator, you need to know such information:
- who exactly are your competitors;
- assortment of products offered by competitors;
- what is the pricing policy of competitors;
- what segment each competitor occupies;
- how much and where do they place their ads and so on.
As a result of the work done, the company will not only correctly calculate its share in the industry, but as a result of data processing can not only reveal the features of the competitors (their advantages and weak points), and use this information as much as possible for the benefit of their company.
Market segmentation
Marketers say that the main competition begins with competent segmentation. Market segmentation involves the separation of buyers with many of their needs into groups that are homogeneous according to the requirements. Hence, it means that the sector is a group of consumers with similar characteristics. The main purpose of dividing the industry into segments is to identify groups of buyers with relatively uniform needs for the product. By identifying such groups, the company can correctly determine the range of manufactured goods, competently organize its price and sales activities. To determine the segments in which the activity will be carried out, the following criteria are important:
- the number of potential buyers of products;
- availability of distribution channels;
- terms of transportation of goods;
- product storage conditions;
- the ability to work effectively in the segment and so on.
Market segmentation has a number of unconditional advantages:
- assessment of competition in the industry;
- production of new goods that meet the needs of consumers;
- use of effective marketing strategies;
- the ability to effectively evaluate the company's marketing strategy to consolidate the stability of the position of the market share of the goods
How to evaluate market share
Market share valuation conducted by comparing the marketing actions of competitors with the marketing activities of the company. Assessing market share is important for developing a company's competitive strategy that will be most effective for it.For the competitiveness of the company, it is important that it has competitive advantages that allow it to stand out among its competitors. An important point in assessing market share is the sales forecast - the most important moment in business planning. To do this, you need to conduct a number of studies:
- a survey of potential consumers to study their intentions to purchase the goods offered;
- studying the demand and consumption of the goods offered in different regions;
- the study of the physical limit of demand (for example, a person, as a rule, does not need more than one cell phone number);
- in relation to durable goods, it is necessary to study the rate of wear of the goods.
For a company's market share to be sustainable, its marketing strategy must be flexible, considering options such as the emergence of new competitors or the cost of raw materials.
Market Share Analysis
The company's sales are indicators of the consumer reaction of the market to its products. However, in addition to the analysis of sales, an analysis of the market share must be carried out. It is always necessary to know how things are with competing companies producing the same products and operating in the same market, because the valuation of the share of a product always depends on the underlying market. It is necessary to ensure that this base is one for all competing brands. At the same time, it is important to consider the risks that, when new brands are introduced to the market, the share of each competitor may fall. Sometimes an exceptional factor, such as a large order, can influence market share. Regardless of the method for determining the underlying market, market share can be calculated in several ways:
- by volume (the ratio of the number of products sold to the total sales in pieces on the base market);
- in value terms (calculated on the basis of revenue);
- calculation of market share not relative to the base market, but relative to sales in the segment where the company operates;
- comparing the relative market share of the company with sales of competitors.
When measuring market shares in accordance with various options, it may be difficult to find the right data for competitors. However, in consumer goods markets, access to such data can be obtained through dealers and consumer unions. Moreover, their accuracy is becoming increasingly high thanks to devices for reading product codes.
Importance of Market Share
Market share is a prerequisite for a business to make a profit, as well as an important tool for evaluating its effectiveness. The market share of a start-up enterprise must be periodically calculated to determine its dynamics. Moreover, it is advisable to do this at regular intervals. The presence of its permanent stable share in a certain segment of the market gives the company the opportunity to seek additional markets, thereby increasing its market share, which will lead to an increase in the company's profit and respect among competitors and among consumers, to creditworthiness.
Conclusion
Market share is An important factor for the development and growth of any company. However, winning another segment for its products, any manufacturer should first of all think with respect for his consumer, offering him quality products, not saving on good raw materials and at the same time offering an affordable price. Only a consumer, convinced of the high quality of the goods offered to him, can ensure the company a stable position among competitors.