In today’s entrepreneur driven society, there are a lot of terms that are used especially in evaluating a company. Market Share is one of those terms that have come to stay. All businesses regardless of how niche their product or service targets are, must constantly monitor how well it’s performing in its market and this refers to a business’s market share. 


So let’s start with a basic definition, according to Investopedia: Market share represents the percentage of an industry, or a market's total sales earned by a particular company over a specified time period’. Delving a bit further, when talking about market share in the context of a product, you are computing the ratio of a company’s products purchased by consumers in relation to the total number of products including competing brands.


Let’s say you own the only poultry store in your local government, producing 1000 eggs monthly and these are the only eggs available in that market in say, the month of June. What you have is a monopoly meaning your market share of the local egg market is 100%. Most economies tend to avoid monopoly markets as competition drives price dynamics and innovation. If we introduce a competitor in July who produces another 1000 eggs and you both sell 500 eggs each, you have divided the market share equally meaning you both own 50% of the market. 


How does it affect My Business? 

It simply shows how profitable your business is. Market share is a good indication of how well one’s business is performing against its competition. It determines how valuable your company is in the eyes of potential investors and how in demand your product or service is regarding consumers or customers. 


In highly competitive markets, Companies compete for the higher market share to thrive and drive growth and profitability. Companies with higher shares can afford to offer incentives to attract customers without affecting their bottom line. Having a high share affords companies the opportunity to scale up, reduce prices and bank on sales volume rather than production and sale cost margin. 


Businesses can strategically sell 5 products at a reduced price rather than selling one at a higher price, but profit from sales volume all the same. Market share is a good means of assessing your competitor’s performance in the market. By monitoring your competitor’s share, you gain insights into their product performance and adopt strategies to acquire part of their share or prevent your competitors from attracting your market share. 


If your competition has a higher market share, you have to understand why the market favors the product over yours and develop strategies to beat them at the marketplace. Understanding this concept is a good means of determining the target market for your product or service. 

For example, companies producing mass-market products will look to target higher sales volume while pricing remains average. This means companies in this category are interested in selling One million products and are willing to sell their products at market friendly prices either equal to or slightly lower or higher than the competition. Refer back to our poultry example above, every poultry farmer will look to sell all his or her products to all and any available customer. 


On the other hand, companies dealing in luxury items are not looking to target high sales volume. Rather luxury items take pride in the exclusivity of their market and therefore set higher prices and target a smaller niche of the population usually categorized as High Net worth Individuals (HNI’s).

For example, let's take a luxury brand car market. The most expensive cars in the world are not targeted at the mass market and are priced out of this category. Therefore, understanding this concept will enable businesses understand what market category they should be targeting, hence, enabling them to map out the right marketing mix for their business.


Market share is also a good means of calculating market saturation especially regarding testing the viability of your product/service. Monitoring market share indices means you can assess the competitiveness of your industry. If market is split among numerous competitors, it’s an indication that the market is open to innovation and willing to try out new entrants into the market.  

However where market saturation is high, you would need to adapt your strategies to accommodate this factor. Strategies and tactics to increase market share include:

  • Product innovation

  • Pricing model

  • Promotions and Marketing 

  • Niche Targeting


Have you researched to know your market share? What are your findings?

Share with us in the comment section.