What is market share? Understand your market share's importance to business growth. Develop a strategic management model that includes market share, marketing mix strategies, product segmentation and marketing swot analysis.
(This page is a continuation of Define Market Share - Part 1.)
Understanding what is market share (and what your share of the market is), needs to be an important step early in your marketing planning process and it is a necessary step to building your strategy in business.
If you know what your market share is then you can better target your growth, your competition, and your customers.
Therefore, defining market size and market share usually occurs during the market segmentation and target marketing phases of the marketing plan.
It is necessary to conduct market research to find out what your market share is and to determine the size of the market you operate in. It can be challenging finding the data for market size. Make sure that you first define your market properly.
For example, if you have an industrial product for sale: let's use remanufactured engines as an example; what is your market?
You need to include not only the obvious (automotive shops); but also individuals who like to re-build cars; in-house service centers for large transit corporations, or automotive fleets; or even marine shops; industrial construction sites; and so on. Do not narrow your market too much; unless it truly is a very niche product.
Then decide the geographic territory that you do, or will, operate in.
For example, if you are a small to medium business, you might want to define a city (or part of the city, like the West Side) or town as your market place. If you are a restaurant owner, is your market the neighborhood you operate in, or is it the entire city?
It is important to define your market clearly because that definition will be necessary when you write strategic plans for market entry or growth.
Again, in the example of the restaurant owner, the target market might be families living in a close neighborhood looking for cheap, healthy, and tasty with large food quantities or double-income-no-kids (DINKS) adults who are willing to drive a distance for an elegant, and expensive, meal.
Once you've defined your overall market size, and the market that you plan to operate in (which can be smaller than the overall market, at least to begin with), you will need to find out who your competition is and how much of the market they hold.
For example, back to the restaurant owner (it's an easy business to use as an example):
Would he or she want to open their new restaurant on the same block as eight other restaurants focused on the same target market? No. Would the restaurant owner be worried that his business was 'under attack' if a new restaurant with similar food menu and similar target market opened across the street? Yes.
When you're doing your strategic planning, developing marketing mix strategies, building your marketing plan and narrowing your focus on product segmentation, you need to run through some of these competitive strategies and scenarios to be ready to cope with changing competitive pressures.
To do it well, you need to have a good understanding of who your competitors are. Make sure you include them all.
For the restaurant owner, it's not just other restaurants; it's also coffee shops, delicatessens, take out food from grocery stores, and so on.
For the remanufactured engines (the industrial product example further above), it's all those who sell remanufactured engines AND new engines and alternatives into the same geographical market.
The most common mistake is to underestimate the number of competitors and overestimate your own share of the market. To try to define market share for your business, go to your industry trade journals or to financial reporting databases.
For example, in the printing industry, there is a Top 100 listing of the top 100 companies in Canada. If you know that the overall market size is $10.7 billion in sales, and the Top 100 represent 80% of that market, you can estimate your market share (or 'piece of the pie').
Other sources such as Forbes, Fortune, Business Week, The Economist, Standard and Poor's, and Far Eastern Economic Review (and more) can provide good sources for market research. If you're looking at a market with public companies, you can get the sales revenue data from their annual reports.
Why is understanding the definition of market share and how to increase market share important?
Because knowing your market share can help your business understand its competitive strength compared to others in the market.
And with an understanding of your market share strength (or weakness), you can assess the impact of product changes, staff changes, price changes, service changes, marketing promotions, distribution channel changes, and so on, on market share.
Once you understand what increases market share for your business, you can focus your efforts on your business growth.
Increasing market share can be at a cost you may not be willing to pay (for example, lowering price while costs increase; or changing product features and benefits to satisfy customer needs but at a high cost) but you need to be able to define what is market share and understand how to increase market share in order to manage it, and your business.
Understand Competition Analysis and how to manage your competitive tactics.
Conduct an Industry Analysis to learn more about your marketplace.
Build strong Market Strategies to win more market share.
Or for more on how understanding market share will help your business compete, return from What is Market Share to Define Market Share, Part 1 of 2.
Return to Definition of Marketing.
Or return to More For Small Business Home Page.
Marketing is a requirement for all businesses: without marketing strategies and tactics your business will struggle to survive.
Not all marketing activities are planned: you might be building your brand recognition through a social media campaign (that's marketing); you might be conducting market research to analyze your competitors and/or segment and target your potential market or to develop the most desirable features, advantages and benefits of your products or services (that's all marketing).
Marketing is pretty all–encompassing; and a challenge for many business owners. The additional challenge is recognizing that the different stages of your business life–cycle: start–up, mid–cycle, mature or late–in–life.
During start–up you need to develop your marketing strategies to grow sales; for example, you might want to use a market penetration pricing strategy to build sales quickly.
During mid–cycle, you need to grow your customer base (often through lead generation) and that need requires different marketing strategies, such as cold calling on prospective clients, email marketing, newsletter and blog sign ups and distribution (all to grow your list of prospects).
During the mature cycle, you need to build your marketing efforts around your brand; your competitive advantage can be in your reputation, history, and identity and on what differentiates your business from your competitors.
Marketing your products and services is not something that you do once (such as a marketing plan) and then never change or do again. You need to be continually researching and building your strategies and tactics to be ahead of the market, and ahead of your competition.
The market is constantly evolving; ever more rapidly with the impacts of globalization and technology. You need to invest resources into marketing to ensure that you build and sustain your business.
Developing a unique value proposition (UVP) was the single most important strategic marketing step that our association took last year; and Kris Bovay helped us to develop our association's UVP.
We put it on our website and into our publications and marketing materials.
Using various and applicable examples, we also use it to give our sales letters and e-mails added strength and to resonate more effectively with our marketplace.
Working with Voice Marketing Inc. and Kris on our marketing has been productive and results-focused. She's passionate about what she does and is dedicated to getting the outcomes we want and need for our association.
Marilynn Knoch,Executive Director, BC Printing & Imaging Association (BCPIA)
When you operate a small business it's a challenge to go on vacation (who will handle your work while you're away) and to get enough time with your family (ironic isn't it; many people start their own business because they want more time for their families).
As a small business owner, you may find it's also a challenge to find the resources you need to land a new client or complete a project on time.
The most effective way to handle these issues is to develop your own small community of resources: your own business network.
The benefit of networking to small business owners is that you can find and develop strong peer group relationships: if your business needs to meet a tight deadline and you do not have the internal resources to finish on time, contact people in your network and see if you can sub-contract a portion of the job to them.
Because your business and personal reputation are on the line (in delivering the end product), make sure that you first develop a strong network of contacts and associates. Get to know those who are in your network really well. Then work together on smaller jobs or joint projects: for example, submit a joint request for proposal (RFP) bid.
You need to know the quality of the work your associate produces and to trust in the integrity of individual(s).
However, even with trust, it makes good business sense to have them sign a confidentialty agreement and no-compete clause related to work and clients that you have obtained.
Once you've developed a solid relationship, you can have them cover for you when you go on vacation or when you need a day off for the family. Obviously you need to be prepared to do the same for them.
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