Posted in Marketing and Strategy Terms, Total Reads: 512
Definition: Buying Market Share
Buying market share is a technique used y firms to increase the market share of their products by reducing the prices to even a loss making level. These firms act under the assumption that, customers once used to buying from their firm will continue to do so even if the prices of the products are increased.
If customers start buying the products of the company only because of its low price, and there is no other differentiating factor for the company to offer to make customers stay back, they incur the risk of losing customers once the prices are raised again. A company should never follow this strategy if price is the only card they have left to play against a competitor. Such strategies will be useful if the product in itself is differentiated and offering it at a low price will ensure that customers try our products, and once they do so they will be attracted to its value addition and will not want to shift to any other product.
This is termed as buying market share probably because of the fact that you incur losses while tto increase your market share- which is akin to buying your market share.
Example: examples for such strategy being followed will be abundant in terms of local stores, who charge low prices to lure customers in and once they have established their loyalty they start increasing their prices.