Marketing success often depends on how well a business maintains and grows its market share while building strong brand loyalty among customers.
Market Share
Definition of Market Share
Market share is the percentage of total sales in a market that a single business secures over a specific period. It can be calculated based on either sales revenue or the number of units sold, depending on the type of business and the data available. It is a critical performance indicator that reflects a company’s competitive strength in relation to its rivals.
A business with a high or increasing market share is typically outperforming competitors in terms of attracting customers and generating sales. This can signal to investors, stakeholders, and the market as a whole that the company is successful and potentially growing.
Market share is especially important in highly competitive markets where businesses compete for the same customers. A firm’s ability to capture and grow its share of the market can lead to greater influence over pricing, stronger brand reputation, and better economies of scale.
Formula for Market Share
To calculate market share, businesses use the following formula:
Market Share (%) = (Business Sales / Total Market Sales) × 100
Where:
Business Sales refers to the revenue or number of units sold by a specific business within a certain time frame (e.g. a quarter or a year).
Total Market Sales refers to the total revenue or total units sold by all businesses in the same market during that period.
This formula gives the business’s proportion of total market sales, expressed as a percentage.
Example
Imagine a smartphone company generates £150 million in sales over one year. If the total smartphone market in that region is worth £750 million, the market share is calculated as follows:
Market Share (%) = (150 / 750) × 100 = 20%
This means the business holds 20% of the total market value, giving it one-fifth of the market’s revenue. If the business increases its sales to £180 million the following year and the market remains the same, its market share would rise to:
Market Share (%) = (180 / 750) × 100 = 24%
This increase in market share reflects improved performance relative to competitors.
Importance of Market Share
Market share is a key benchmark in business performance analysis and has a number of strategic benefits:
Assessing Competitive Position: Market share helps a business understand how it performs relative to competitors in the industry.
Monitoring Performance: By tracking market share over time, businesses can evaluate whether they are growing, maintaining, or losing ground in the market.
Investor Confidence: Growing market share can signal strength and stability, attracting investors.
Strategic Planning: Helps inform pricing, marketing, and expansion decisions.
Profitability: Larger market share can result in increased revenue and cost advantages through economies of scale.
In many industries, businesses aim to become market leaders — firms with the highest market share. These companies often benefit from brand recognition, cost leadership, and influence over market dynamics.
Market Share as a Marketing Objective
Marketing objectives often include increasing market share, especially in highly competitive markets such as:
Fast-moving consumer goods (FMCG): e.g. Coca-Cola, Unilever.
Retail supermarkets: e.g. Tesco, Lidl, Aldi.
Technology companies: e.g. Samsung, Apple, Huawei.
Automotive industry: e.g. Ford, Toyota, BMW.
Businesses pursue market share growth through strategies such as:
Price reductions or discounts to undercut competitors and attract price-sensitive customers.
New product launches to target unmet needs or growing segments.
Increased promotional activity to raise brand awareness.
Geographic expansion to reach untapped markets.
Exclusive partnerships or enhanced distribution to improve product accessibility.
Achieving a higher market share often requires investment in marketing, innovation, and customer experience. However, once achieved, it can lead to increased profitability, customer loyalty, and a stronger brand position.
Brand Loyalty
Definition of Brand Loyalty
Brand loyalty is a customer’s consistent preference for a particular brand over time, often shown through repeated purchases, resistance to switching brands, and positive advocacy. A loyal customer continues buying from a brand even when competitors offer lower prices or similar features.
Brand loyalty arises from a combination of product satisfaction, emotional connection, and trust in the brand. It is particularly valuable in markets where products are similar and differentiation is limited, such as toothpaste, coffee, or mobile phones.
Strong brand loyalty leads to a steady stream of revenue and reduces the business’s dependence on attracting new customers, which can be expensive and time-consuming.
Measuring Brand Loyalty
There are several ways to measure brand loyalty. These can be qualitative or quantitative:
Repeat Purchase Rate: Percentage of customers who make multiple purchases from the same brand within a specific time frame.
Customer Retention Rate: The proportion of customers who continue to buy from a company over a period of time.
Net Promoter Score (NPS): A survey-based measure that asks customers how likely they are to recommend the brand to others on a scale from 0 to 10.
Customer Lifetime Value (CLV): The projected profit a business expects to earn from a customer throughout their relationship.
These indicators help marketing teams track the health of customer relationships and adjust strategies to increase satisfaction and loyalty.
Strategies to Increase Brand Loyalty
Developing brand loyalty is an essential long-term marketing goal. Businesses use a variety of tactics to foster customer attachment and build ongoing relationships:
1. Consistent Product Quality
Customers expect a reliable and consistent experience. Quality issues can quickly erode trust. Ensuring that products meet or exceed expectations every time strengthens satisfaction.
2. Excellent Customer Service
Providing timely, helpful, and empathetic support increases customer confidence. A business that handles complaints well can actually strengthen loyalty through positive resolution experiences.
3. Strong Brand Identity
Building a recognisable and relatable brand is essential. This includes:
A clear brand message.
Memorable logo and design.
Consistent tone and values.
A strong identity makes the brand easier to remember and connect with on an emotional level.
4. Loyalty and Reward Programmes
These provide incentives for continued purchases. Examples include:
Points systems (e.g. Tesco Clubcard).
Exclusive member discounts.
Early access to sales or new products.
Reward schemes make customers feel appreciated and encourage them to stay with the brand.
5. Emotional Branding
Brands that evoke emotions such as joy, pride, nostalgia, or trust are more likely to create lasting bonds. Storytelling, meaningful campaigns, and shared values (e.g. eco-consciousness) play a role.
6. Engagement and Communication
Regular updates, personalised messages, and two-way engagement (especially on social media) can make customers feel part of the brand community.
7. Corporate Social Responsibility (CSR)
Customers often remain loyal to brands that align with their values. Businesses that demonstrate ethical practices, sustainability efforts, or social contributions can build deeper loyalty.
Long-Term Value of Brand Loyalty
Creating and sustaining brand loyalty offers a range of long-term benefits:
Predictable Revenue: Loyal customers tend to make frequent purchases, helping maintain stable cash flow.
Reduced Marketing Costs: Retaining customers is significantly cheaper than acquiring new ones.
Higher Profit Margins: Loyal customers may be less price-sensitive and more willing to pay premium prices.
Positive Word-of-Mouth: Satisfied loyal customers often become brand ambassadors, referring friends and family.
Greater Resilience: In times of economic downturn or increased competition, loyal customers are more likely to stay.
Improved Customer Feedback: Long-term customers often provide more insightful feedback, helping with product development and service improvement.
Loyalty also helps businesses implement cross-selling and up-selling strategies more effectively, boosting the average transaction value per customer.
Industry Examples of Brand Loyalty
Apple: Its customers often upgrade to newer iPhones, use multiple Apple products, and stay within the Apple ecosystem due to familiarity and quality assurance.
Nike: Through compelling campaigns, athlete partnerships, and consistent branding, Nike fosters a strong identity that resonates with customers globally.
Amazon: Its Prime membership, fast delivery, and customer-centric approach result in high customer retention.
Starbucks: Combines rewards, personalised marketing, and store ambience to keep customers returning regularly.
Relationship Between Market Share and Brand Loyalty
While market share and brand loyalty are separate concepts, they are closely linked:
Businesses that build strong brand loyalty often experience market share growth, as repeat customers increase total sales.
Firms with high market share can use their resources to invest in loyalty strategies such as improved service, rewards programmes, or community building.
In competitive markets, long-term success depends on balancing market share growth and brand loyalty. Businesses that focus only on short-term share gains (e.g. heavy discounts) may win sales but risk losing loyal customers if the brand experience declines.
To succeed, marketing departments must align short-term and long-term goals:
Set measurable objectives for market share increases.
Monitor and improve loyalty indicators regularly.
Integrate both into the overall marketing strategy to ensure sustained growth.
FAQ
Market share data helps businesses understand their competitive position, which can guide pricing strategies. A firm with a dominant market share may use premium pricing due to brand strength and perceived value, knowing customers are loyal. Alternatively, a smaller business aiming to grow market share might adopt penetration pricing to attract customers from competitors. Analysing market share trends over time also shows how past pricing strategies affected position, allowing firms to adjust prices to balance profit margins with competitive advantage.
Customer feedback provides direct insight into what customers value and what needs improvement, making it a powerful tool in loyalty-building. By acting on feedback, businesses show they listen and care, reinforcing trust and satisfaction. It helps identify recurring service or product issues that may damage loyalty if ignored. Engaging with feedback—publicly responding or implementing changes—creates a two-way relationship, encouraging repeat business and advocacy. Positive changes based on customer input can become a unique selling point in competitive markets.
Yes, a business can have strong brand loyalty among a small customer base while still holding a low market share. This is common in niche markets or among luxury brands where the focus is on depth of loyalty rather than broad customer acquisition. For example, a premium skincare brand may have a small but highly devoted clientele. Though it doesn't dominate the market in volume, its customers are consistently engaged, repeat purchasers, and less price-sensitive—often leading to high profitability despite limited share.
Businesses typically use quarterly or annual sales reports to calculate their share and compare it with previous periods. They gather market-wide sales data from industry bodies, trade publications, or market research firms. This allows them to calculate their percentage and identify trends. They may also segment market share by region, product category, or customer group to pinpoint growth areas. Tracking over time reveals the effectiveness of marketing strategies, competitive threats, and opportunities for expansion or realignment.
An emotional connection makes customers feel personally invested in a brand, turning transactions into relationships. Brands that align with customer values, aspirations, or lifestyle—through storytelling, shared missions, or consistent tone—create deeper bonds. This connection increases customer tolerance for higher prices or occasional service lapses. Emotional loyalty also drives brand advocacy, as emotionally engaged customers are more likely to recommend the brand. In saturated markets, emotional resonance can differentiate a business where product features alone cannot.
Practice Questions
Explain why increasing market share is often a key marketing objective for businesses operating in competitive industries.
Increasing market share is vital in competitive industries because it allows businesses to outperform rivals, increase revenue, and gain greater influence over pricing and suppliers. A larger share signals brand strength and customer preference, making it easier to attract investment and negotiate better deals. It also leads to economies of scale, reducing unit costs and improving profitability. Market share growth can act as a benchmark for success, enabling firms to evaluate marketing effectiveness. In fast-paced markets, even a small gain in market share can significantly enhance a firm's position and long-term viability.
Analyse two strategies a business could use to improve brand loyalty.
One strategy is offering a loyalty scheme that rewards repeat purchases, encouraging customers to stay with the brand and increasing their lifetime value. This creates a sense of appreciation and adds value beyond the product. Another strategy is ensuring consistent product quality, which builds trust and reliability over time. Customers who have positive, consistent experiences are less likely to switch brands. Both strategies contribute to emotional and behavioural loyalty, helping the business retain its customer base, reduce marketing costs, and support long-term profitability and stability in competitive markets.
