Impacts of Advertising

Market Share

Market share is key metric that helps firms evaluate demand in their market and can be influenced by PR and marketing campaigns.

LEARNING OBJECTIVES

Discuss how companies use market share as a key indicator and tool to increase market competitiveness

KEY TAKEAWAYS

Key Points

Market Share metrics, a desired asset among competing firms, enable firms to judge not only total market growth or decline, but also trends in customers’ selections among competitors.
Losses in market share can signal serious long-term problems that require strategic adjustments. Firms with market shares below a certain level may not be viable and may need to change their advertising tactics or their products.
Pricing strategy is one of the tools that is significant in creating and sustaining market share. Prices must be set to attract the appropriate market segment in significant numbers.

Key Terms

Market Share: The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.
selective demand: The demand for a specific product brand.
primary demand: The demand for an entire product category.

Market Share

Increasing market share is one of the most important objectives of business. Market share is a key indicator of market competitiveness—that is, how well a firm is doing against its competitors. This metric, supplemented by changes in sales revenue, helps managers evaluate both primary and selective demand in their market.

Demand

Selective demand refers to demand for a specific brand while primary demand refers to demand for a product category. It enables a company to judge not only total market growth or decline, but also trends in customers’ selections among competitors. Generally, sales growth resulting from primary demand (total market growth) is less costly and more profitable than that achieved by capturing share from competitors. Conversely, losses in market share can signal serious long-term problems that require strategic adjustments. Firms with market shares below a certain level may not be viable. Similarly, within a firm’s product line, market share trends for individual products are considered early indicators of future opportunities or problems.

Strategies to Create Market Share

2009 Hyundai Sonata: In 2009, Hyundai released a new PR campaign where people who bought new Hyundai cars could return them if they lost their jobs within a year of buying the car.

Research has also shown that market share is a desired asset among competing firms. Management of all firms, large and small, are concerned with an adequate share of the market so that their sales volume will enable the firm to survive and prosper. Pricing strategy is one of the tools that is significant in creating and sustaining market share. Prices must be set to attract the appropriate market segment in significant numbers. Price is important to marketers because it represents the marketers’ assessment of both the value customers see in the product or service, and how much they are willing to pay for a product or service. Competitors often try to gain market share by reducing their prices. The price reduction is intended to increase demand from customers who are judged to be sensitive to changes in price. Price reduction is often seen in newer brands that have to compete with already existing brands. New brands not only require lower prices to penetrate the target market, but they typically require more investment as well. Advertising improved quality on products is another way market share can be affected. Also, making products and services easier to access can increase a firm’s market share. For example, offering products online with easy payment options can increase sales.