What is Market Share? [Definition, Formula and Calculation]

What is Market Share?

Market share is defined as the percentage of total sales made by your company of any product or service. That is, against that of the whole industry.

This metric gives a rough estimate of the company’s size and its brand value compared to its competitors within any particular market. The company with the highest market share is called the Market leader.

You can calculate market share by dividing your sales by the total sales of the entire market that you are a part of.

Any company whose market share remains constant over a while is said to be growing in revenues parallel to its competitors. (There are many product management tools to research your company’s close competitors. ) An increasing market share corresponds to a speedier and market-leading boost in the revenue generated by the company.

What Is an Example of Market Share?

Suppose Abc Electronics sold $5 million in televisions in the United States over the same period, out of a total market of $100 million. Abc Electronics has a 5% market share. This number is used by businesses to assess their relative market position with their targeted consumers.

How to Calculate Market Share?

We hope you have understood the market share definition by now. It is time to move ahead and learn how to calculate market share.

Market share is calculated by dividing your company’s sales by the overall sales of the market that you are part of.

Market Share Formula:

To calculate a company’s market share, one must first determine the period, a year, a fiscal quarter, or a couple of years. Then you must calculate the company’s total revenue for that period. 

The second step is to determine the entire revenue of the company’s sector. Lastly, divide the company’s total sales by the real income of its industry.

Investors and analysts can receive market share statistics from a range of different sources, including regulatory organizations and trade associations, and the company itself.

How to Increase Market Share?

To get as much out of your marketplace, you can explore several strategic approaches, including:

You can explore several strategic approaches to get the most out of your marketplace, including:

• Increased sales to current clients.

• Concentrating your client service and advertising initiatives on customer retention.

• Expanding your consumer base to include those that are identical to you but aren’t your customers.

• Current clients.

• Selling in emerging markets or through new approaches.

• Putting your key competencies to work in launching innovative products or services.

Why is Market Share Important?

We learned what market share is and how to calculate market share. Now let us understand why market share is significant. 

Investors and analysts always keep track of any changes in a company’s market share. This metric can be an accurate measure of the relative performance of the company’s products against its competitors. 

Also, how effective its marketing and advertising campaign has been. Thus, if you are looking for any funding, your market share mustn’t decrease over time.

Market share increase allows a company to expand its operations and increase profit. There are many ways companies can plan to expand their market. 

As in lowering prices, advertising on a greater scale, introducing new products, and so on. Apart from this, a company can also plan an expansion to newer territories with a new audience.

Another great way to increase your market share is through innovation and disruption. Offering a new technology that your rival companies do not have access to is a foolproof method of convincing the consumers to shift to your product.

A thorough analysis of its market share is vital for any organization looking to scale up and increase profits. Changes in the market share are generally indications of the company’s competitive advantage, which is essential for other vital areas such as stock performance.