Using Market Share as a Strategy for Greater Profits

by Sean Boyce

October 8, 2019

You’ve determined the appropriate product-market fit, created a product that solves an unmet need for consumers, and launched it with great fanfare. Now is the time to pivot to growing your company. Focusing on increased sales is an obvious benchmark for measuring profits, but it’s not the only path to growth. One of the most effective strategies is to work towards a larger market share.

What is market share?

Market share is the percentage of sales or units your company has compared with the overall market in a time period. If the total sales in your industry is ten million dollars this year, and your company’s sales are one million, then you have a 10% market share. If one million units were sold, and you’ve sold one thousand, then your market share is 1%.

Why is this important?

As always, the more relevant data you have, the better you will be able to make effective decisions. For instance, you might assume that the company spending the most on advertising is your most formidable competitor, but this may not be the case. The company with the largest market share in your industry may be marketing “under the radar”, and this would likely be the competitor you should be closely studying to understand how to grow your own company.

How to increase market share.

INNOVATION: Providing consumers with the best solution to their problems will automatically give you an advantage and spur growth. Apple’s iPhone captured a huge share of the cell phone market, largely due to their ability to continuously innovate. Consistently improving your product, and adding upgrades, is the surest way to get more sales and market share.
HIRE THE BEST TALENT: How many times have you heard of executives recruited to work for rival companies within an industry? Those people have track records of building companies and increasing profits, which is why they are so sought after. A company focused on increasing market share should be more than willing to invest in employees who can achieve that goal.
CUSTOMER SATISFACTION: Providing an exceptional buyer experience is the best way to create brand loyalty, and have customers return again and again. It’s the primary reason that Amazon Prime is so successful. The product line is huge, purchases are made and paid for with a couple of clicks, delivery is free, and goods are received in one to two days, or even the same day the sale was made.
ACQUISITION: A quick, albeit expensive way to scale up is to buy one of your smaller competitors. While this can result in an automatic and dramatic increase in market share, it’s a complicated financial decision.

The benefits of having a greater market share

In addition to the obvious growth in sales and profits, a larger market share puts companies at a competitive advantage in other ways. Buying power is increased because suppliers may offer better prices to larger companies, and costs of producing individual units may decrease. These economies of scale often lead to more efficient methods of operation, which in return brings greater ROI as a company grows.