2008 Q3 Building Market Share
If you expect to grow market share, you must determine the location of the most promising sources of new revenue. This means employing two measures: “share of wallet” of existing customers and “market potential” of prospective ones.
One frequent business goal is to increase market share. There are four logical ways to capture greater market share:
- Secure more business from existing customers
- Enter new markets
- Penetrate existing markets to a greater extent.
- Acquire a direct competitor
To increase revenue, it is more efficient to grow sales with existing customers than to obtain new ones. The cost of acquiring a new customer can be very expensive so it typically makes sound economic sense to cultivate relationships with existing customers by maintaining high levels of customer satisfaction.
Entering new markets by expanding into adjacent territories can be an effective means of increasing share. For example, a financial institution seeking to expand in an area of community growth can build a branch office to accommodate prospective customers.
Penetrating existing markets can be quite effective. For example, a food company selling its products to grocery stores can increase market share by acquiring new distribution channels, e.g. adding distribution to convenience stores and warehouse clubs.
Lastly, the acquisition of a direct competitor provides an incremental market share improvement very quickly. However, this type of market share pickup usually comes as a more expensive alternative.
Each of the aforementioned ways has advantages and disadvantages associated with them, and come with varying degrees of cost. Establishing priorities and developing applicable marketing strategies can lead to more sources of revenue.