Strategies for Gaining Market Share
One of the most talked about challenges in business today is how to gain more market share. The more of the marketplace that is buying your product, the more profit you generate. There are dozens, if not, hundreds of strategies that companies can apply to their own businesses in order to attract customers away from competitors or to generate new customers from previous non-consumers. Below are some of the more commonly studied tactics that have been observed in consumer products and services in recent years.
Adding New Products
Expand your product line by adding new innovative offerings to your current ones. It may reduce the market share per product but it will likely mean an increase in total market share for your company. Soft drink companies are excellent examples of companies who frequently use this strategy. By offering 'diet' and 'caffeine-free' versions of their product to consumers, they expand their net market share since they are now targeting a consumer with a different set of needs and values. While their original formula version may suffer a slight decrease in market share due to consumers switching to the newer version, the company has overall made an increase in sales by attracting a new slice of consumers as well. Since these products are so similar, they are called product substitutes. The strategy of expanding market share through product substitutes is also known as product cannibalization.
A second method that companies use to gain market share is to develop complimentary goods for the products in those markets where they would like to become dominant. Household consumer products and personal care products are common markets where this scheme is applied. Think of shampoos, conditioners and styling mousse all marketed under similar brands. Companies are forever developing and marketing innovative complementary goods to their products to encourage consumers to spend more on their already trusted brands.
There are several pricing stratagem that firms can apply to their product suite to capture market share. A common one for newer firms is pricing penetration. This is when a new company wants to entice potential customers to try their good or service in an already competitive or saturated market. Examples of this were observed when upstart phone companies Mobilicity, Wind and Public Mobile tried to penetrate the informal oligopoly of large telephone service providers. Promotions advertising extremely low prices, or contract free plans, were offered with the intention of raising prices later when they had established their market presence and had obtained a loyal following of customers.
A similar tactic to this is to get customers to spend more on your brand. The first step of this strategy is to determine what products they buy from your competitors more than you and then offer promotions (such as buy 2 get 1 free) on that product specifically. This strategy is used especially in highly competitive markets where consumers aren't terribly brand sensitive.
Redefine the Market
By exporting and selling overseas, you are radically opening up your business to a new set of customers who have similar needs, wants and values. There are many challenges associated with this strategy of course, but the opportunities may also be well worth the effort, particularly if there is less competition in these overseas markets. Once these new target consumers are understood by your company and appropriately marketed to, it will be easier to dominate in that market than in your currently over-aggressive marketplace.
A second method of redefining the market is to gain market share by selling to a previously unserved market segment with similar needs. An example of this method can be seen in sport revitalizing drinks, such as Gatorade and Powerade, which were originally targeted at athletes. Once that market became saturated, these beverage manufacturers began to open up their marketing messages to appeal to a broader range of health conscious consumers. Other beverage companies noticed the potential in this market and began to develop innovative mineralized water products that are marketed to health-conscious consumers who are both athletes and non-athletes.
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