Market Leader

What is a 'Market Leader'

A market leader is a company that has the largest market share in an industry, and which can use its dominance to affect the competitive landscape and direction the market takes. Companies may be the first to develop a product or service. This allows them to set the tone for messaging, define what the ideal product characteristics are, and to become engrained in the public eye as the brand that consumers associate with the product itself.

BREAKING DOWN 'Market Leader'

A company that enters a market as a competitor can differentiate itself and obtain majority market share by aggressively marketing its version of the product, and may indicate that whoever developed the original product version is “dated” or old-fashioned. Companies may also invest heavily in market research and product development, and then use consumer information to develop features that update an existing product.

Maintaining a dominant market share requires a company to not only retain its existing customers by building brand loyalty, but also attract new customers who may be unfamiliar with the product or service in question. The company may also attract the customers of competitors by finding consumer pain points, such as price or quality, and marketing their product as a solution to that pain point. For example, a computer manufacturer may lower its prices to increase pressure on a smaller competitor. In this regard, it is trying to price its competitor out of the market, even if this results in a short-term loss.

Market leaders have to be careful when it comes to how they use and obtain their market share. If a company becomes too dominant in the market or if it seems to be abusing its position it may become subject to anti-trust lawsuits. A market leader may also find that maintaining a large market share costs more than the revenue that market share brings.