Understand what market share is and the importance of knowing your company's market share

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No matter how innovative a company is, it is expected to have competitors with whom it competes for greater market share.

This participation, also known as Market Share , represents —among several particularities— the portion of the public that your business was able to conquer, which is directly proportional to the benefits of using our homeowner database income generated by that part of the market.

Do you want to learn more about the importance of the concept of market share, understand how to calculate it and even get tips on how to increase this indicator for your company?

We show you all that below!

What is market share?
We can understand the idea of ​​market share from several aspects. Whatever parameter is used, the objective is to determine, through percentages, to what extent companies in the same field of activity stand out from others .

If we imagine the potential market of a company in a certain sector as if it were a pizza, the market share would be the slice of that public that consumes your products and services.

In this case, it is about brand penetration , an important piece of information for planning and evaluating the company's marketing actions .

We can also evaluate market share from the point of view of sales volume or even the number of users , if the company operates in the digital asset industry.

Another way to look at market share is as a reflection of the size of the company's operation compared to its competitors, something that is closely related to the value of the brand , and of the company itself, in the market.

To give you an idea, in the search engine industry , Google has a market share of around 92% , while Bing has about 3% and Yahoo has almost 2%.

This says a lot about the strength of Google, which is the preferred search engine in the vast majority of countries and considerably dominates its opponents.

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Why is market share so important?
By tracking how that engagement increases or decreases over time, organizations have a good indication of whether their marketing strategies and strategic planning actions are having the desired effect or not.

While increasing market share may be a good sign, declining market share may mean that steps need to be taken to contain competitive pressure .

Analyzing the business in this aspect is a way to understand how it is performing, taking into account the ecosystem of other companies.

When we evaluate growth only by internal indicators , checking the increase in net profit from one quarter to the next, for example, we have a comparison factor between the results of the organization itself.

By calculating and examining market share on a regular basis, we find incentives to focus on the company's objectives or to create new ones and we have an extra incentive to look for new opportunities or identify the company's weaknesses .

Even companies with greater market share often enjoy competitive advantages , such as negotiating power with suppliers and credibility to establish alliances.

How to calculate this indicator?
Now let's look at three ways to calculate market share.

Target audience
If we cross-reference internal customer base data with demographic studies and statistics published by organizations in Latin America, it is possible to have a very close notion of the company's market share.

Let's say an organization sells products targeted at women ages 20-34 and operates in a region that has 200,000 women in that age group.

If the company has 10,000 registered customers, we can divide that number by the number of potential customers and we will reach a market share of 5% (10,000 / 200,000 = 0.05 = 5%).

Market share = Customers gained by the company / Potential customers in the company's area of ​​operations

Income
Calculating market share based on revenue may seem straightforward, as we only need to divide the company's revenue by the total revenue of its industry over the period.

Market Share = Company revenue / Total revenue of the most relevant companies in the sector

The problem is that, depending on the industry you are in, that information may not be readily available.

In that case, it may be necessary to make estimates or commission studies to obtain a minimally accurate calculation.

Market value
The calculation with the market value follows the same reasoning as the previous criteria.

Market Share = Market value of the company / Total market value of the most relevant companies in the sector

If your company is valued at 50 million pesos and in your sector there are only four other relevant competitors, priced at 25 million each, your market share will be: 50 / (50 + 25 + 25 + 25 + 25) = 50 / 150 = 0.33 = 33%.

Brand penetration
Brand penetration is now a more subjective factor, which will require worthy market research tools.

There are ways to conduct such a study by promoting surveys and interviews with consumers on your own, but the ideal is to hire this service from a specialized company.

In this case, the calculation of market share is more complicated, as it will involve the margin of error and statistical concepts that go beyond the scope of the post.

How to increase your company's market share?
It's time to check out the important tactics that companies use to increase their market share.

Create new marketing strategies
There are companies that offer quality products, but do not make known what they have to offer to the market. Here, Digital Marketing strategies can be excellent allies to attract new customers and increase brand recognition .

With relatively low initial investments, it is already possible to see an interesting return. By identifying the most suitable channels , we obtain even more satisfactory results.


Invest in innovation
Developing innovative products and services is another way to gain a competitive edge for your company. Remember that innovation is not exclusive to startups or technology organizations.

With innovation management measures and the maintenance of an organizational culture focused on creative problem solving, significant progress has already been made in this direction.

Improve customer relationship
Providing good customer service and after-sales service that demonstrates how much the company values ​​its customers is one way to promote customer loyalty . As a result of that loyalty , they will give preference to your brand and even recommend your company to others.

We saw, then, that market share has a number of aspects. Knowing and monitoring it is a way of knowing if the evolution of the business is going according to plan or needs some adjustment, as well as being a real opportunity to know how you position yourself in the industry in which you operate.

Do you want to learn more tips on how you can develop your business and thus ach