Relative market share is a metric that helps companies identify their position in the market compared to their leading competitor. The market share of the latter is the benchmark.
In this article, we'll explain why relative market share matters, unveil the difference between this measure and market share in general, share the formula to calculate it, and offer tips to increase the metric.
Why is relative market share important?
Calculating your relative market share allows you to find out the major players and understand the position you can occupy in the market. To have a clear picture of this metric, check out the example below.
For example, Company A has 35% market share in the jewelry industry, which seems rather impressive. It means that 65% are occupied by other firms. If there are 5 top brands producing jewelry, they will split the remaining 65% among themselves and each one will get approximately 10% market share which makes Company A a leader.
Although, if there are 3 big companies producing gas boilers, Company A can have 35% market share, Company B — 40%, and Company C — 25%. So, 35 % market share no longer seems so attractive. Hence, 35 % market share can make a firm either a leader in this niche, or a second-third player in another industry.
You should understand that high competition in such industries as logistics or retail leave you much lower relative market share than 35% because these markets are really concentrated. Relative market share helps brands predict their total performance in terms of revenue and plan their strategy accordingly.
Now let’s find out the difference between market share and relative market share.
Relative Market Share vs Absolute Market Share
While relative market share means the performance of a particular company in terms of the most powerful brand in the market, absolute market share helps businesses monitor their position compared to all the competitors in the niche.
Investors are especially interested in the absolute market share before offering their financial support to any brand. This measure helps them evaluate the situation on the market and predict revenue they can get. Knowing the absolute market share of each competitor provides a clear picture backed up by concrete figures which help investors make an informed decision.
Now that you know how relative market share affects brand success, it's time to move to calculating this measure.
How to calculate relative market share?
To find out this metric, you can use 2 formulas.
Relative market share = 100*firm’s market share/biggest competitor’s market share
Or you can use the formula below:
Relative market share = your firm’s sale/biggest competitor’s sales
Figuring your relative market share allows you to see your success in terms of the market leader. High market share in one industry can make you the biggest player, while the same percent in another niche — lag behind. With these figures in mind, you can have a clearer picture of your company performance, hence, make the right decision.
If your relative market share turns out to be low, don’t give up. Follow our tips below to improve the situation.
How to increase your market share?
- Increase the quality of your product
- Improve your promotion strategy
- Nurture leads effectively
- Develop a loyalty and referral program
- Decrease prices
If you enter the market with a high market share, there are no guarantees of high revenue in a year or two. So, we strongly recommend that you imply several strategies below into your business to keep pace with the market.
- Increase the quality of your product. Carry out a thorough analysis of your competitor's products to find out their weaknesses. It can be poor customer support, problematic refund and exchange issues, no guarantee or after-sales service. With this information, you know the improvements your customers do need. Finally, you can ask them directly what they would change to optimize your product.
- Improve your promotion strategy. A well-planned advertising campaign will help you boost brand awareness, acquire new prospects, and rocket sales. Start with free advertising tools such as email marketing. SendPulse allows marketers to send 15,000 promotional emails every month at no cost. Include SMS campaigns, web push notifications, retargeting ads, and ads on socials. Choose the channel your potential clients like.
- Nurture leads effectively. Very often prospects drop off the sales funnel because they lack information on the product and customer support. Be ready to provide customers with valuable content at each stage of their journey. Offer them demos, step-by-step guides, your most successful case studies, reviews, and short checklists.
- Develop a loyalty and referral program. Loyal clients are the most valuable for each business. They help not only maintain the average revenue but bring in new customers. So, they work as a word of mouth. Reward such clients with points, discounts, and personalized offers to show that you appreciate them. This way, they won't switch your brand to a competitor's one.
- Decrease prices. This technique won't work to your advantage forever. Still, it helps expand your market share and attract new clients. Offer time-limited discounts such as high-low pricing or everyday low price to create buzz around your brand.
Choose the strategy that will fit your brand best or combine them to keep your market share high.
Congrats, now you know pretty much about the concept of relative market share. Monitor this metric regularly and increase it with the help of SendPulse promotional tools.
- This article highlights the differences between relative and absolute market share.
- This article provides an example for calculating relative market share.
- This article offers 5 ways to increase your market share.
Last Updated: 12.03.2021