differences between market size and market share

Define Market Size

Total number of potential buyers of a product or service within a given market, and the total revenue that these sales may generate.

Describe market size

Markets vary enormously in size and each are governed by the laws of demand and supply. Obviously very few products are capable of appealing to everyone, however, those that do try are called mass markets. Mass market refers to a large, undifferentiated market of consumers with widely varied backgrounds. For example soft drink (carbonated drinks market).

Niche market

We would say that the market for bobsleds is a niche market appealing to a very small number of potential customers.

how can market size be expressed

total buyers, total sales volume (unit) or total revenue produced by sales within the market.

Explain Market Size

Niche markets is likely to attract small specialist producers. These businesses produce low volume but charge premium prices for higher profit margins. This is due to the low supply of the product and its specialised features that cannot be obtained from many places. Large companies are likely to ignore these markets because there is insufficient return to justify entry and no opportunities for economies of scale in production. Instead, they prefer to market to a mass market.

Market size explain why

Businesses can use market sizing to estimate how much profit they could potentially earn from a new business, product or service and its potential growth in the future. This helps decision-makers to decide whether they should invest in it (profitable).

what else can market size help estimate

the number of employees that you may need to hire before you launch a new product or service, rather than guessing as you test your new market. If you know this from the start, you can optimize your approach to recruitment, so that you have the right people in place when you need them.

Market size can help determine target audience

To ensure the elements of the marketing mix are addressing their needs and wants.

Based on volume of sale or the number of units sold

good to compare businesses when selling price of the product differs greatly

Based on Sales Value or money received from sales

good to compare business when selling price is similar

Number of customers

this is used more frequently as businesses of loyalty rewards – good to compare return customers.

Discuss Market Size

This is usually achieved through acquiring ownership of smaller businesses that already operate in this market.

Define Market Share

Market share refers to the portion or percentage of a market earned by a particular business or brand. 

Describe Market Share

Market share can be expressed as a percent of sales (volume or value) in an industry generated by a particular business.

There three main measures of a market's size. These are:

The volume of sales - volume measures the number of goods sold by quantity, e.g. bottles of cola.

• The value of sales - measures the amount spent by customers on the volume of goods sold and will be expressed in a currency $ value.

• The number of customers

Explain Market Share WHY

market share is a key indicator of a business competitiveness. When a business increases its market share, this can improve its profitability. This is because as business increase in size, they too can scale, therefore offering lower prices (economies of scale) and limiting their competitors’ growth due to the limited number of total consumers within the market.

Investors monitor

increases and decrease in market share to determine which businesses are profitable.  As the total market for a product or service grows, a business that is maintaining its market share is growing revenues at the same rate as the total market.

An increase in market share also enhances the reputation of a business. This reputation can increase

brand loyalty with current customers but also attract new customers increasing the business growth. As a business achieves high market share it can dominate within the market by setting the standards and pricing of a product.

Due to the high volume of sales within a market the business with high market share also gains

bargaining power with stakeholders such as suppliers. They can negotiate to its advantage supply costs and other favourable terms, gaining more of an advantage of its competitors.

How Can Businesses Increase Market Share?

A business can increase its market share by offering its customers innovative technology, strengthening customer loyalty, hiring talented employees, and acquiring competitors.

How Can Businesses Increase Market Share? new technology

When a business brings to market a new technology its competitors have yet to offer, leads to a distinct competitive advantage. Many of those consumers switch, which adds to the business market share and decreases market share for its competitor. This switch can be long term if the new technology has intellectual property associated, meaning no other business can copy.

How Can Businesses Increase Market Share? Customer loyalty

By strengthening customer relationships and ethical practices, business protect their existing market share by preventing current customers from jumping ship when a competitor rolls out a hot new offers and gain new customers.

Discuss Market Share Economic factors

play a larger role in the variance of sales, and revenue earnings, more than other factors. During economic downturns/contractions businesses offering higher quality products within a market tend to lose more market share as discretionary spending of consumers decrease.

Discuss Market Share Value vs volume

A business might sell a large volume of products. However, it may be that your sale price is lower than competitors therefor, the total value of sales (total sales revenue) is less than a competitor, which sells a smaller amount of a more valuable product.