Market Share 101: How to Create, Maintain and Increase Market Share in Your Industry
If you’ve ever been to any business event, market share has probably been a major topic. Indeed, in today’s business world, market share practically defines success – you’re as successful as how much market share you have today…
… or rather, that’s the wrong formula.
Market share isn’t about how many customers you have today, it’s about how many customers you will be able to retain in the future.
Before we go deeper, I want to make sure that we get rid of common misconceptions that many business owners share regarding market share (pun intended!).
Wrong ideas regarding marketing share
1. If you have a small market share in your industry and aren’t even close to the top performers, you have almost no chance to gain more, a.k.a. your business is as good as dead.
Let’s set something straight – market share consists of people, and people aren’t robots. This practically means that any company can get through and attract customers (even from their competitors) if they use their business data correctly. Take the example of DropBox. DropBox has managed to stand tall and lead the worldwide market for file sharing with 27% market share, in the midst of competition like Microsoft (18% market share), Box (14% market share) and Apple (10% market share).
2. You simply can’t compete with biggest players in certain industries – they will always win.
Ever heard of Huawei? In 2016, Huawei managed to hold 9.3% market share of the global mobile phone industry, alongside giants like Apple and Samsung, and numerous other famous manufacturers like Lenovo, Sony, Motorola, etc.
3. Don’t try to copy the leaders – it will just make them stronger.
Now this statement can be very misleading. If you think about their marketing and social media messaging, then surely copying ads or Tweets will do no good for you and boost their character even more. However, you don’t become a market leader just by sheer luck – the guys at the top must have done a lot of stuff right. There is a lot that you can learn from your competitors and copying their style can be good in some cases.
For example, if you are a retail store, you could study how your competitors choose their territories and store locations, or if you are a coffee shop, study their brand image, how they approach their customers, their customer loyalty programs, etc.
4. Be consistent with your strategy.
If you are using a marketing strategy that just doesn’t deliver, what good will it do to be consistent?
It’s important to understand that business is a very flexible environment and tweaks and adjustments will be needed all the time. Be consistent in analyzing your approach, finding weaknesses and promoting strengths, over and over again, but don’t stick to the same strategy/tactics if they just don’t work – that’s a waste of resources and morale.
Now that we have gotten those out of the way, let’s understand what market share IS.
What is market share?
In the simplest terms, market share is the number of loyal customers that continuously fuel your sales funnel, willing to put in their time and money into your company.
The keyword here is loyal.
A loyal customer is that guy at a café that doesn’t simply order a soft drink – he orders coke. When the waitress says we serve Pepsi, he responds with “bring me some tea or coffee then”. He isn’t a first time buyer and he’d rather have a completely different drink, than a drink that he just doesn’t like.
There is a strong reason behind this.
Ever heard of the Pareto principle? The principle states that in most cases (or events) 80% of the results come from the 20% of causes. This is true, and has been proven, for many areas – economics, work, land ownership, and business world.
If you take a look at your business data, you will notice that roughly 80% of your sales comes from 20% of your customers. These are the loyal guys that buy your products or services when there are lots of substitutes available, and your goal is to increase the number of those 20%.
Have you ever seen a game of soccer? The fans gathered in the stadium, in the first row, with colored faces and flags, they aren’t simply people who love soccer – they love soccer played by their favorite club, and they will choose that club over and over and over again, stay with it through victories and defeats – these are the loyal fans.
This kind of interest isn’t just luck or coincidence – it’s a choice.
These people chose their club, much like your loyal customers choose you over competitors. Market share is the choice of customers to continuously buy the products or services of a particular company based on what appeals to their personality, which brings us to the next thing:
How to create your market share?
You’re not going to get customers lining up outside your doors to purchase products just like that. You need to create your own, unique value for customers to shop at your business.
There are two steps to make this happen – differentiating yourself and understanding your customers.
The very first thing you need to do is differentiate your business from the rest of your industry. One of the best ways to do this is to find your own niche in the industry and focus on that.
For example, in the automobile industry, both Volvo and BMW make cars. However, the difference is that Volvo focuses on creating the safest cars in the world (and with that, attracting and maintaining customers who value safety above all else – most likely people with families and small children), while BMW focuses on producing cars that are fast, furious and offer the best possible control for drivers, offering “the ultimate driving experience” (these are people who love adrenaline, take risks and enjoy high speed).
Notice how both Volvo and BMW make cars, but they serve completely different customer segments and most probably, a Volvo driver will have very little in common with a BMW driver, wherever they meet.
In the same way, soccer is the game that players play, but everyone plays differently – some favor offence over defense, some play an aggressive style, some fall back to defend their lead after they acquire it, and others try to apply even more pressure when in lead. Different strategies give birth to different styles, and much like the strategies, soccer fans don’t just like football – they like the football played by their club.
The difference lies in the value creation process and the value presented to customers and fans. In other words:
Your first step onto differentiation, is creating a value that is different from what the market currently offers.
A very good way to create this kind of value is to take a look back and remember your passion – why did you even start your company in the first place?
For example, the leaders of Saab, a Swedish automobile company, were aerospace engineers, which lead to some aviation aspects to emerge in their car designs, and that was a very big differentiation back in 1950s.
Your differentiation and value doesn’t need to be something huge or fundamental – it can be small, but still do the trick. For example Threadless, a T-shirt producer, highly focuses on customer engagement and lets people design their own T-shirts.
If you still don’t know where to start with your differentiation techniques, taking a look at your business and sales data can give you a hint in the right direction. Knowing and understanding why regular customers buy from you can be a good place to start, which leads us to the second point of creating market share:
2. Know your customers
You know how they say in detective movies? “To catch the killer, you need to think like him, you need to become the killer”.
To know and understand your customers, you must put aside your own likes/dislikes and put yourselves into your customer’s’ shoes – you need to think and act like your customers.
This is where your business and sales data may help you – find out about what kind of people usually buy from you, what are their preferences, where do they live, what places do they visit, etc. and all this can give a very strong idea about your target customer profile, which you can use in combination with differentiation techniques to start creating your own market piece.
How to retain your market share
Retaining your market share is even more important than creating it initially. If you can’t retain your customers, there can be no hope of growing and expanding your business. In this sense, each and every company needs to, again, put customers on the highest priority level and do everything in their power to continuously fuel their loyalty.
Market share retention can be approached from different angles.
For starters, you need to offer your customers everything they can get from any other competitor that you have including high quality service, customer assistance and care, hearing their voice and opinion, etc. In other words, your customers need to feel “at home” with your company, and have no space for thinking of switching to a competitor for any of those reasons.
Next, you will want to put in the time and resources to continuously study the new market trends, your customers, competitors and keep coming up with fresh ideas as how to increase the loyalty even further.
It’s important to understand that you won’t be able to copy the big players and their customer loyalty strategies all the time, and the reality is you don’t need to.
For example, if a competitor is offering lower prices on the products you sell, you might not be able to lower your prices to match them, taking into account your financial position. Instead, you might want to create another value that will justify the higher price for your products or services.
Let’s say you own an applicable retail store. While your competitor might offer lower prices on the same products that you sell, a good way to justify your price could be offering free shipping and installment of the tech your customers buy. This way, customers can buy a washing machine at your store at a higher price, and in exchange, receive the benefits of having it shipped and installed for free at their homes. In this case, comfortability of purchase may outweigh the higher price, depending on your customer segment.
Generally, a solid way to approach customer retention is to think about how you can save time for your customers. The time can vary from minutes to hours depending on your business, but the essential part is the focus on time.
For example, some cafes promise to deliver your order, no matter how big or small it is, in a certain amount of time, and if the delivery time exceeds their promises, you can have the meal for free.
How to increase your market share
When it comes to increasing your market share, the best approach to take is to focus on providing more value to your customers for their time and money. Think about what can you do to deliver even more value for the same price and time than your competitors – again, it doesn’t have to be anything big, even small benefits will add up overtime, but more importantly, your customer centric approach will be noticed, recognized and appreciated by people, and help you conquer market share from your competitors.
Going back to Huawei mobiles example.
Huawei was able to conquer big chunks of market share from giants like Apple and Samsung by offering the same technology and value (including customer care, support, warranty, etc.) at a considerably lower price.
Now the brand name of Apple and Samsung still stands tall in the world and most people will refuse to change their mobile gadget brand preferences no matter what you do (think about the crazy apple fans gathering outside the Apple store, willing to stand in line for days, just to get their new smartphone). However, since the mobile market is global, people started seeing the value of getting a smartphone for half the price and putting their faith in Huawei.
Never ever underestimate the power of your own business and sales data. Most business owners struggle to find ways to increase their market share, but they never look under their very nose.
Your business and sales data, when salvaged and interpreted correctly, can give you directions, answers and opportunities that you never knew existed before. Modern technology can (and should!) be utilized in order to get the most information out of your own terabytes of data that’s sitting on servers doing nothing, when in reality, it is your best friend in any difficult situation.
Conclusion – Gaining market share is about offering more value for your customers’ time
At the end of the day, it all comes down to time – humans make hundreds of choices everyday, and to really tilt the scales in your favor, you need to show them that choosing your company has enough value for time. The key to understanding what kind of offers will your customers be willing to respond to lies within your own sales and business data – you just need to salvage and put it to good use.