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What is market share research?

Market share is the ratio of a company’s sales volume (sales amount) to that of the likewise products in the market. It reflects the consumer and user satisfaction to the product and service provided by the company and shows the market position of the product offered by the company. Market share is the share that the product of the company occupies in the market and it is the control ability of the company to the market. The higher the market share is, the stronger a company’s operational and competitive strength is. With the constant expansion of a company’s market share, a company can obtain the monopoly in a certain way, which will not only bring the profit to the company but also retain its competitive advantage.

What kind of problem can be solved by market share research?

We used to evaluate a company’s performance by the indexes like sales growth rate, sales profit and return on investment while neglect market share, an important index. In the period when the economy develops rapidly, the market purchasing power is increasing year after year, and all the companies who among the competition can benefit from it. Even if it is a company with weak competitive strength, its sales will go up somewhat to gain profit. However, when the market demand is saturated, market growth rate is at a standstill. And the market competition is bound to be a fight in order to grab the share among the fixed and limited profit. Market share must also be considered in measuring a company’s performance. In the period when the market is sluggish, even if the sales volume decreases, as long as the market share rises up, the performance of the company is good. Because if the market share is high, once the market recovers, sales will increase sharply.

How to conduct market share research?

To know the proportion of the sales volume of the surveyed product in the whole market of its likewise products by second-hand data collection and consumer questionnaire survey; by comparing the change of the proportion of the sales volume in the past one month, past three months and past six months, analyze the trend of the change of sales volume. Combine this with the execution of market strategies, we will know the marketing effect. Besides, if a company masters the market share of its surveyed product, it can further analyze the current market situation it faces according to Lanchester’s Law.

Introduction of Lanchester’s Law:

The target value of market share educed by Lanchester’s Law can help you judge the position of your product among the competition:

1.Top limit of the target value: 73.9%
The company is monopolizing the market with absolute advantage. At this point, the company is absolutely safe among the competition. If he wants to obtain the share over 73.9%, it is not the best plan. This is because:
(1) Even if a company has obtained a monopolized share, it’s impossible for him to get 100% share as currently customers prefer diversification. The rest share is the loyal customers of other companies, namely his opponents. It will cost the company a lot of money if he takes these people as his target.
(2) It will lead to the competition with other industries.
(3) The relationship between market share and return on investment is like this: when the market share rises up from 10% to 74%, return on investment will increase correspondingly. But when the market share exceeds 74%, return on investment will gradually decrease.
(4) The demand will lack of elasticity. The fiercer the competition is, the bigger elasticity of the demand is. When the share reaches a monopolized level, the real competing relationship will decrease, and the demand will lack of elasticity.

2.Stable target value:41.7%
If there are three companies competing in the market, who get 41.7% market share first will surpass the other two competitors in the advantage position. He will become the mainstream of the industry and hold a safe lead soon.

3.Lower limit of the target value:26.1%
Though a certain company’s sales performance ranks the first, its position is not stable among the market competition. He may be surpassed by others at any time. The number 26.1% is a standard to measure whether a company is stable or not. If a company surpasses 26.1%, it means that he may stand out and take the lead.

The above three target values can help you identify the position of your company among the competition, look forward to the future, and know what target value you should move on.