Two main growth paths for market share

 

Two broad areas of growth – the market itself and market share

The opportunity for growth in unit sales is underpinned by two aspects:

  1. The level of growth in the marketplace – that is, the growth phase of the product life-cycle, where new consumers start purchasing the product category for the first time – this is referred to as primary demand.
    With growth in primarily demand, most/all competitors will generally experience an increase in unit sales independent of their changing market share position. Note: In growth markets, competitive rivalry often increases to gain market share – as per a key underlying assumption of the BCG Matrix.
  2. And growth from consumers switching to the brand from competitors – this is known as secondary demand – this will be shown as an increase in unit market share.

There is, of course, the option to gain an increase in revenue market share, where the firm/brand is successfully able to increase its price premium (usually due to a stronger brand) and acquire a greater proportion of the consumer spend, without the need to increase unit market share.

Identification of growth areas

Given that unit sales can grow either through natural growth in the market (primary demand = new consumers) OR through increased consumer preference (increase market share) – the firm should be able to identify the prime area for growth. Clearly sales growth in a growth market is easier to deliver than growth via market share gains (see below).

The challenge in a mature market

Market share will becomes a more important metric in a mature market. In a naturally growing market (that is, the growth phase of the product life-cycle) there are significant opportunities for all brands/firms to grow comfortably.

However, in a mature market, sales become a zero-sum game where growth needs to occur through increasing market share – and, of course, firms/brand will usually act quickly to recover any lost market share, which will escalate the level of competitive rivalry in the market.