This article is about growth of the market.
Successful Marketing requires firms to understand which market they are operating in, who their consumers are and where they are located, whether the market is growing or shrinking, what the business’s share of that market is and how strong the major competitors are.
What is meant by market growth?
Market growth refers to an increase in size of the market over a specific period of time, usually one year, or one quarter.
Market growth is expressed as the percentage (%) change in the total size of the market over a period of time. For example, if the market grows from USD$100,000 to USD$150,000 worth of products sold, this means 50% growth in size.
How to measure market growth?
Market growth is not always easy to measure. It is because there are two common ways to measure market size, so it can be done in an ambiguous way.
Market growth is typically measured by an increase in Volume of Sales or an increase in Value of Sales:
- Volume of Sales is the number of units sold.
- Value of Sales is the sales revenue received from the units sold.
Let’s say that total sales in the market for shirts rose from 20 million shirts sold at an average price of USD$20 to 25 million shirts sold at an average price of USD$40. Then, market growth can be measured in the two following ways:
- By Volume of Sales. The market has increased from 20,000,000 units sold to 25,000,000 units sold. The market growth was 25%.
- By Value of Sales. The sales revenue has increased from USD$400,000,000 to USD$1,000,000,000. The market growth was 150%.
The ultimate choice between these two methods used to calculate the changing market size belongs to the business. Business managers will always choose the measure of market growth rate that best reflects their own position and interests.
Concluding, it is usually better for a firm to be operating in a growing market as good sales fix many business problems.
