How to Maintain Your Market Share in a Changing Market

What is market share?

The market share definition is the percentage of the market a particular business owns versus its competitors. Market share is a competitor analysis metric used to understand your company's success relative to the entire market. For example, Netflix has the largest market share compared to other video streaming services, so it's safe to assume they're more profitable than competitors like Hulu or HBO Max.

Market share is typically calculated over a period of time and may be separated by various factors like regional or national levels to help a company get an idea of how well it's doing compared to its competitors.

Calculating your company's market share is simple; all you need is your company's total sales and overall industry revenue, which you can find through market research.

Your company's total sales / total market sales x 100 = Market share

Let's say your company manufactures and sells electric vehicles. We already know you have several competitors. Now, let's say in 2023, EV sales are $1 million, and your company's sales are $125,000. To calculate market share, you’ll need to plug the numbers into the formula above. This gives us:

Market share = $125,000 / $1,000,000 x 100 = 12.5%

Now, that's a fairly moderate market share, but that's not necessarily a bad thing. You can focus on growth and scalability if you have a low market share. On the other hand, you'll need to defend your position if your market share is high.

What is relative market share?

Relative market share compares your market share to the top competitor, which can help you determine how well your business is performing against the market leader. Ultimately, you're using their market share metric as a benchmark for your own business.

The relative market share formula is:

Your market share / competitor's market share = Relative market share So let's say your market share is 12.5%, and your competitor's market share is 44% for the same period. The equation now looks like this:

12.5% / 44% x 100 = 28.41%

Why is market share important?

Market share is a way to benchmark your sales to determine your position among the competition. Benchmarking is important because it can help you find opportunities to create successful marketing campaigns or communicate better with customers, identify gaps, understand your competitors, and increase sales.

Market share fluctuates regularly. New businesses join the market all the time, while those who were the first to the market have become the most well-known brands. In any case, knowing your market share can benefit your business in several ways.

Most importantly, knowing if you have a high market share can help you determine whether you can scale and become more profitable, allowing you to increase sales. Higher market share also impacts customers since they're more likely to purchase products and services from well-known companies.

Being a leader in market share allows you to dominate your industry and take risks with bigger rewards. For instance, you can innovate in ways other brands can't because you have more market share and more profits to spend on innovation.

However, while you want as much market share as possible, you don't want too much market share. For instance, if you have 80 -100% market share and consumer behaviors change, it could affect your sales and profits.

Instead, decide how much market share you want. There are costs associated with building and maintaining market share; the more market share you have, the more expensive it will be to preserve because all your competitors will be trying to knock you out of first place.

How to maintain market share

Market share changes for many reasons, including those beyond your control, like economic conditions. However, you can maintain or increase your market share by following these tips:

Focus on innovation

Innovation is at the forefront of the most successful businesses today and can help you increase your market share. By using technology to create unique products and services, you can bring something new to the market your competitors can't. This allows you to solve customer pain points with new products they can only get from you.

Innovative companies have loyal customers and become the most trusted market leaders because they were the first to do something.

Research the competition

If you currently have a low market share or aren't the market leader, you can maintain your market share by researching your competition. What are they doing differently to attract customers? You might find they have lower prices, better quality products, or they invest more into certain initiatives than others.

Strengthen customer relationships

It's much more cost-effective to sell products to individuals that already know your brand. Maybe they've already purchased a product from you or engaged with your social media posts. Whatever the case, strengthening your customer relationships can help protect your existing market share regardless of economic factors.

Boosting customer engagement can also increase satisfaction and build loyalty, making getting repeat purchases more likely.

Invest in employees

Your customers aren't the only ones who need your attention if you're trying to maintain or increase market share. Focusing on hiring top talent can help your business improve because dedicated employees often reduce costs by increasing productivity and efficiency.

Your top performers excel at their jobs, helping your business succeed in all aspects, from product development to marketing and sales. Of course, investing in employees means investing time in training and money in benefits and salaries.

Yet, you'll soon find that the more you support your workforce, the more they'll invest in your business, helping you maintain market share no matter how competitive your industry is.

Offer quality products and services

Consumers are willing to pay for quality products and services, even at a premium. While you should use a pricing strategy that makes the most sense for your business, ensuring your products and services provide value to customers is crucial.

If you have higher prices than the competition, you must have better quality products, regardless of your industry. Otherwise, your prices and low-quality offerings can hurt your reputation, leading to a loss of sales and a lower market share.

Raise brand awareness

Brand awareness is crucial if you're not the leader in your industry. Most of your prospective customers have heard of the market leader but might have never heard of your company. Businesses should always continue brand awareness marketing efforts because they can help them capture more market share by reaching more people.

The more people know your brand, the more likely they are to purchase your products and services. Therefore, you should invest in marketing strategies to grow your audience.

Acquire competitors

Don't want your competitors gaining more market share while increasing yours? Acquire them. Acquiring another company within the same market increases your market share tenfold because you'll earn their market share and add it to yours. It also reduces the amount of competition.

Lower prices

Lowering your prices is another way to attract more customers and increase your sales. Every consumer wants a good deal regardless of their income, and reducing your prices widens your customer base, giving more people access to your products and services.

Of course, lowering your prices can significantly impact your business, so it's not the right option for everyone. For instance, it can hurt the company instead of helping you increase your market share if you’re not generating a profit.

Understand your company's market share for success

Understanding your company's market share can help you evaluate where you stand among the competition to help you make more informed decisions about how to move your business forward. Since market share indicates a company's success, finding ways to maintain and improve it is crucial, especially as consumer behaviors change and market conditions fluctuate.

Marketing your products and services to the right people allows you to increase brand awareness and sales. Use Mailchimp's suite of marketing tools to create effective marketing campaigns that boost your market share and set your business up for success.