What Does Market Share Mean to You?
Market share is a metric every business must take into consideration. Some firms will tout market share as the only means to judge success, while others ignore it completely, looking only at profit margin. Both approaches are a misuse of this valuable metric. There are a number of reasons to increase market share, but there are also reasons not to increase it.
This is the most obvious of reasons. Increased sales volume can be used to gain a cost advantage over competitors.
When you have a large portion of market share, you can begin to bargain with suppliers and channel members.
Industry not Growing
If the industry you are in is refusing to grow or in the midst of a recession, capturing competitor market share can increase sales.
When you are seen as the dominant force in your industry, you gain the advantage of word-of-mouth advertising and increased prestige among customers.
Why not Increase?
If your production capabilities are maxed out, a market share increase would involve extra expenditures within operations and production.
Loss of Profit
If market share is increased with a price decline or production cost, you may decrease your overall ROI.
If competitors find their market share slipping away, a price war could ensue causing profits to drop dramatically.
These represent just a few reasons. The market share discussion can become much more involved. One thing almost anyone can agree on is knowing your market share is important to successfully managing your business. With the increase in data intelligence knowing your market share is easier than ever.