Definition: Out of total purchases of a customer of a product or service, what percentage goes to a company defines its market share. In other words, if consumers as a whole buy 100 soaps, and 40 of which are from one company, that company holds 40% market share. Description: There are various types of market share. Market shares can be value or volume. Value market share is based on the total share of a company out of total segment sales. Volumes refer to the actual numbers of units that a company sells out of total units sold in the market. The value-volume market share equation is not usually linear: a unit may have high value and low numbers, which means that value market share may be high, but volumes share may be low. In industries like FMCG, where the products are low value, high volume and there are lots of freebies, comparing value market share is the norm. The significance of market share: Market share is a measure of the consumers' preference for a product over other similar products. A higher market share usually means greater sales, lesser effort to sell more and a strong barrier to entry for other competitors. A higher market share also means that if the market expands, the leader gains more than the others. By the same token, a market leader - as defined by its market share - also has to expand the market, for its own growth.ADVERTISEMENT How much market share is enough? Usually, gaining 100% market share is not a good idea, as the risk associated with market actions, like fashion changes, product / use changes will impact the company heavily. Also, the cost and effort to maintain 100% market share against nimble, local or more aggressive smaller competitors can be very high and killing. Most companies decide on a target market share beyond which the cost of acquiring marketshare is more than the profit from that incremental gain.
Advertising - A paid form of communication and promotion involving a product and its attributes.
Agent - An intermediary who does not take title to merchandise but facilitates exchanges by bringing buyers and sellers together.
Brand - An identification (name, symbol, etc.) of a product that is unique and distinguishable from competitor’s products.
Channel of distribution - A product’s trip from producer or manufacturer to the buyer.
Coupon - A certificate that entitles a consumer to a price reduction or a cash refund. Demand - A schedule of the amount of a product that will be purchased at various prices.
Discount - A deduction from the list price in the form of cash or something else of value.
Forecasting - To predict the quantity of a product that will be sold at various times in the future.
Income - Money received in return for labor or services provided, sale of assets and return on investments.
Intermediary - An independent or corporate-owned business that helps move products from the producer to the ultimate consumer.
Label - A tag or part of a package that provides information about a product.
Market - A group of individuals with unsatisfied wants and needs who are willing and able buyers. It can be defined as narrowly as a specific place where buying and selling takes place or as broadly as the demand for a product.
Marketing research - A systematic and objective approach to developing and providing information for decision making regarding a specific marketing problem.
Marketing strategy - Marketing approach or method used to achieve a marketing goal.
Packaging - Designing and producing the container or wrapper for a product. Personal selling - Person-to-person communication in which the receiver provides immediate feedback on the source’s message. Purchasing - To obtain a product in exchange for money or its equivalent.
Price - The amount of money asked in exchange for something else (e.g. product).
Price fixing - When several firms in an industry collectively establish the price for a product.
Pricing strategies (market based) -- Approaches to setting prices based on the willingness of the buyer to purchase the product.
Pricing strategies (cost based) - Approaches to setting prices based on the cost of producing the product.
Pricing strategies (geography based) - Approaches to setting price based on the location and transportation costs associated with delivering the product to the buyer.
Product - Something produced that is sold to willing buyers.
Product distribution - The process of providing a product when and where it is desired by the consumer.
Promotion - Providing and communicating favorable information about a product to potential buyers.
Quality control - The traditional approach to quality in which problems are detected after manufacturing and an effort is made to remove sub-standard products before shipping to customers. Retailing - All activities used to sell products to ultimate consumers.
Selling - Assisting or persuading a prospective customer to buy a product.
Transaction - An exchange between two or more parties. Value proposition - How a product will provide value to its customers. Why a product will provide sufficient value to its customers to be worth its price. Wholesaling - All of the activities involved in selling products to retailers: to industrial, institutional, farm and professional businesses; or to other types of wholesaling intermediaries.
Don Hofstrand, retired extension value added agriculture specialist, |