Market share is, quite simply, the percentage of sales that an organization has in its industry. So it’s no wonder that growing one’s market share is a goal that many companies have in common. While growth in sales may seem like reason enough to expand market share, increased buying power and cost savings through economies of scale are added bonuses to having a larger share of your market.
Is your business ready to pursue increased market share? Jason Bacon, senior manager of Entrepreneur Education with ATB, shares the biggest key to success with increasing market share – understanding your core customer.
“I’m a big believer in the 80/20 rule – 80 per cent of business comes from 20 per cent of customers. Know that core demographic. Assess their needs. It’s like the human body – the core is the core. You need to keep it strong.”
Bacon recommends using a robust customer relationship management (CRM) platform to get these critical client insights and data.
“Data and growth are tied hand in hand. Entrepreneurs often underestimate the importance of data. It’s so critical for decision-making – otherwise you are just throwing darts at a dart board and hoping they stick.”
By leaning on data, you can mitigate the risk of making decisions for your business based on personal bias (which isn’t always reliable). With your data in hand and your customer insights top of mind, your business can now explore a few strategies in the pursuit of increased market share.
Introduce a new product or service
Once you have a solid understanding of your core clientele, the easiest course of action for growth is to expand your product or service offering. Give some thought to what could improve your current business or the lives of your customer base.
Bacon points out, “it’s always easier to sell to someone who already trusts you. Consider a roofing company – an easy way for them to expand their market share would be to add in eavestrough installation as a service offering.”
Determine what your unique selling proposition is, and build your marketing campaign around it.
Work that feedback loop
Do you have processes in place to regularly solicit your customers for feedback? Your customer base is a fantastic resource for giving input into potential new features and product complaints. Find ways to observe consumers using your product in action, this gives great insights into ways to streamline – just ask Heinz, who saved customers from scraping out the bottom of their ketchup bottle with a knife by introducing the upside-down bottle, once they identified that this was a pain point.
Surveys, social media engagement, monitoring reviews, focus groups – these are all great tactics to employ in the pursuit of client feedback.
This feedback loop is especially critical when entering a new market…which leads to our next strategy.
Charter new territory
If you choose this strategy, Bacon has some cautionary advice.
“If you are looking to expand into a market that you don’t currently serve, make sure that your existing market is strong enough to sustain itself – if your profits start to lapse here, your business as a whole will suffer.”
Clearly defining your new market is the first step in this strategy. This will involve undertaking a thorough analysis to understand the market size, demographics, behaviours, customer segments, competitors and potential barriers to entry.
Continuous innovation leads the way as a strategy for growing market share. What new trends are on the horizon? Is your product or service being impacted by technological changes? What problem can you solve?
Back to Heinz, an organization that has worked hard in recent years to build a culture of innovation.
“Heinz is a great example of an organization that has the data and uses it. Consider the three-in-one picnic packs. They were looking to expand their market share and established that people who went camping or on picnics often needed all three, relish, mustard and ketchup. So they packaged them together to sell to a different market, with a different need. ” Bacon states.
Involve your team in identifying challenges and brainstorming solutions.
Be a great employer
The cost of turnover is significant. Forbes reports that turnover ranges from 50 per cent of base salary for an entry level worker to over 200% of salary for a senior executive. Set your employees up for success by understanding their challenges and giving them the tools they need to perform. Compensate fairly and provide opportunities for personal and professional growth. Take a hard and honest look at your corporate culture and whether it is authentic– according to research from Deloitte, 88 per cent of employees believe a distinct business culture is important to the success of an organization and to maximize productivity. Passion, integrity and accountability are just a few of the qualities that make for an excellent team member. When you empower your employees with the right resources, systems and culture, this will help you not only build and retain a stronger team of talent, but also a happier, more invested core market.
Buy out your competition
Not only does the acquisition of a competing product give your company access to new clientele, it also directly increases your market share by removing a competitor from the playing field. It’s also a surefire way to accelerate growth as compared to organic growth methods – not only are you acquiring their product or service, but also their intellectual property, customer base and staff. However, procuring a competitor can be risky and costly so you’ll need to ensure that the financial case for acquisition is solid and truly complementary to your existing business.
The most successful acquisitions are what are known as “tuck in” acquisitions. They are companies significantly smaller than yours that can be easily integrated into your operations and thus cause very little disruption to your day to day business. If new to performing acquisitions this is a great place to start. It can allow you to grow market share as well as create operational synergies by combining the two companies. In the article Selling your business in times of crisis, we discuss how a downturn can provide an opportunity to acquire a competitor through a tuck in acquisition and the positive impact it can have to your company's valuation.
Have an exit strategy
And finally, Bacon cautions, build in exit points during your planning process.
“Set goals, have the metrics in place to measure, and if you haven’t hit certain goals within a certain timeframe, be diligent about stepping back and reassessing.”
Above all else, Bacon advises strongly that you consult with your inner circle before embarking on any major course of action. “Before taking a general leap of faith, talk to your team of experts,” Bacon advises. “Talk to your lawyer, your accountant and your banker about any debt you will need to take on.”
Ultimately, market share is an important indicator of how your organization is faring against competing firms, and growing this share is an advisable goal as you look to grow your business – provided you’ve done the critical foundational work on understanding your core clientele.
Reach out to one of our entrepreneur strategists to explore where you are with your business, where you want to be, and how to get there! If you’re looking for a deep dive on everything you need to know around how to grow your business, our ATB X Accelerator program might be just the place for you.