Calculating market share
Vocabulary.
Market share is the percentage of the market's total sales earned by a company or product.
Calculating market share allows a company to determine its position in the market.
Here are some basic steps to calculate market share.
Determine a period.
To calculate the company's market share, you must choose a period to examine such as a quarter or a year.
For example a company can compare the first and second quarter to see how quickly it is growing in the market.
Find out the company's total sales.
Next, calculate the company's total sales revenue within that period.
Multiply the total number of units sold, but the average sales price per unit.
If a company only sells one product, its sales revenue is the total sales revenue of the company.
If a company sells multiple products, add up the sales revenue for each product.
Companies can assess how well they are performing in a market by analyzing their market share.
To calculate total sales revenue, multiply its total number of units sold and the average sales price per unit.
Before calculating a company's market share, you must determine a specific period to examine.
The company compared its first and second quarter to see how quickly it was growing in the market.
The company has steadily lost market share over a period of three years.
After comparing both quarters, they have determined that the company's market share has been growing quickly.
By analyzing a company's market share, you can assess its market performance.
Find out the total market sales.
Next Calculate the total sales for market that the company operates in.
Sales information from publicly traded companies is easy to obtain since they're legally required to share it.
It can be found through company websites, shareholder reports and trade associations.
Divide the company's revenue by the industry's total.
Finally, to divide the company's total sales by total market sales.
The result is the company's market share.
Comparing a company's market share with the growth of the market shows whether it has increased or decreased.
If a company's revenue has grown more slowly than the market, its market share has declined.
If a company's revenue grows faster than the market, its market share increases.
The 4P's of marketing
Vocabulary.
The marketing mix is a model that helps a company make marketing decisions.
It can be used to influence consumers to purchase the company's products.
It consists of four factors, product price promotion and place.
Product.
Products are goods or services satisfy consumer needs or desires.
A company should regularly update its products to meet changing customer demands.
Understanding the product life cycle can help companies prepare for and adapt to these changes.
Price.
Price impact supply, demand, marketing strategies and profit margins.
Consumer demand is one factor to consider before companies decide the price of a product.
For example, customers shop more around certain holidays like Christmas.
So by reducing their prices during the Christmas season, companies can boost short term sales.
Companies should adapt their products to keep up with the constant changes in the market.
In some cases, business executives may manipulate the price to make a product seem more like a luxury.
The marketing mix is a model that helps a company make marketing decisions.
Promotion.
Promotion allows the company to build brand awareness and interest in its products.
A business can promote itself through advertising, marketing and public relations.
When promoting a product, a company should give consumers a clear reason for why they should buy it.
Place
Place relates to the channels that a company is to sell its products.
This channel may include stores website and mobile apps.
In a placement strategy, a company identifies the best channel to distribute its products.
The increased use of mobile apps in recent years has LED to them becoming popular channels for business.
If companies can successfully promote their products, they will have a better chance of standing out in the market.
Marketing shared terms
Vocabulary.
Total addressable market or TAM is the total market demand for a product in a year.
It is used to indicate how much potential a business has in the market.
Before calculating TAM, a company should consider its ability to reach its target market.
Target market.
A target market refers to a group of consumers that a product or service is aimed at.
These customers can be identified by income level, age gender or location.
By defining a target market, companies can make their marketing campaigns more focused.
Unit sales.
Unit sales refers to the number of products the company sells over a period of time.
For example, if a company sold 5 million mobile phones in a year and it sold 5 million units.
Unit sales analysis can be used to calculate a company's average product price.
By defining a target market, a company can personalize its marketing campaign.
Defining a target market, the marketing campaigns more appealing and effective.
Comparing unit sales regularly can help determine if the company is moving in a positive direction.
Key players.
Companies with a large market share are known as key players.
They have a dominant position in the market.
Without competitive products and services, new companies may struggle to compete with key players.
However, by analyzing key players, strengths and weaknesses, companies can find their own niche in the market.
Market growth rate.
Market growth rate refers to the percentage increase in sales in the market over a specific period of time.
Keeping track of the market growth rate allows the company to compare its performance with competitors.
For example, if a company sales have grown less than market sales, it has lost market share.
Keeping track the market growth rate allows a company to compare its performance with the rest of the market.
New companies cannot compete directly with key players unless their products are innovative.
If new companies can compete successfully, they are likely to become key players within the market.
Marketing positions
Vocabulary.
Market dominance is how strong the company's brand services or products are compared to its competitors.
Typically there are four types of market dominance category.
Leader.
A market leader has the largest market share in it's industry.
It holds a dominant position.
Market leaders are often the first to develop new products and business methods.
In order to maintain their position, most market leaders invest heavily in research and development.
Challenger.
A market challenger has a strong position in the market, but not a dominant market share.
It may adopt aggressive strategy to increase its market share.
Challengers can also increase their market share by focusing on areas the marketing leaders overlooked.
One of the best strategies for challengers to gain market share to introduce differentiated products.
If they hadn't invested so heavily in research and development, they would have lost their position as a market leader.
Follower.
A market follower does not have a stronger position in the market.
It doesn't take risks and usually copies other companies' products or strategy
They do not focus on the increasing market share.
But by adopting the best practices of other companies maintain a stable position in the market.
Nicher
And Asia is a company that concentrates on a specialized market.
Nicher typically provide products or services that are not offered by other companies.
By establishing a niche, a company can avoid competition while making a profit.
Although it didn't have a strong position in the market, was still able to exist as a follower.
New companies can find a niche market by identifying demands that are not being met by other companies.
Followers don't have differentiated products or strategy. They normally have substantially less market share.
Analyzing market share
Dialogue
Hey, George, are you busy?
Not at all, Lucas. What's on your mind?
I wanted to ask you some questions about a research report I just read. It's about the luxury market in India.
Sure. What would you like to know?
The report says the luxury market is growing rapidly, with more money being spent than ever before. For example, from 2015 to 2016, the industry saw a growth rate of about 35%.
Well, India's upper middle class has been growing, which means more people have money to spend on luxury items.
Yeah. And some companies have seen higher sales than ever before. For example, the company trendy had a steady sales growth rate of about 9% from 2015 to 2016. And trendi's market share decreased from 7% to about 5% over the same period. Why is that?
Well, you can't only consider the revenue generated by trade. You need to compare it with sales for the luxury industry as a whole.
Do you mean dividing trendy total sales revenue by total industry sales?
Yes. Also look here. In 2015, trendy grew by 8% and the industry grew by 32%. In 2016, the industry grew by more than 30%, while trendy sales only increased by 9%. In other words, trendy wasn't keeping pace with the industry.
So while trendy was gaining sales, it was actually losing ground in the market.
Exactly. I think trendy has to change its business strategy to appeal to new customers.
How might it do that.
By diversifying its product line or appealing to a new demographic, it might be able to reclaim some of its market share.
How could trendy appeal to new customers?
But we'll have to wait and see. I'm not trendy’s CEO after all.
The market is really getting competitive.I'm excited to see what trendy you will do next.
Me too.
They will have to wait and see what happens.
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