What is market share? Formula and how to calculate it

This can be through product innovation or introducing something your competitors simply haven’t yet, just to highlight two. It consists of those potential customers you want to go after first because of the unique characteristic they have. It is certain that they have high market power because they control market prices. Market leadership refers to the position of a company that holds the largest market share or the highest profitability margin in a particular market for goods and services.

How to Calculate Market Share (With Formulas and Examples)

When Coca-Cola purchased the company, that annual revenue grew to 1 billion dollars in sales. Depending on the industry, relative market share can reveal where your business stands in comparison to a specific industry leader. While this metric is typically used for financials, market share can also be used to determine your business’ digital reach. Owning the market share of consumer attention in your industry helps you gain an edge over your competitors. With heavy, cutthroat competition how to calculate market share in the market, advertising is an excellent way of gaining an upper hand over competitors. By strengthening their existing customer relationships, companies protect their existing market and ensure no loss of the existing customer base owing to high competition.

Analysis of market share is a key to understanding the firm’s performance over time in relation to its competitors. A market share analysis needs to take into account the total size of the market, making reference to the annual business volume either in currency or in the number of transactions. The analysis should also take note of the growth rate of the market, that is the Compounded Annualized Growth Rate (CAGR) that is being taken over the period of three to five years. Understanding your company’s market share can help you gauge its size relative to its competitors and the industry.

• Just plug those numbers into Excel and you will have a treasure trove of data to analyze.
• Additionally, you can analyze public financial statements of companies operating in the market to estimate the total sales volume.
• Then, combine their revenue figures with your own to get a market revenue estimate.
• Market share or absolute market share is slightly different from the relative market share.
• Gaining a larger market share requires thinking long-term about how to capitalize on existing momentum and keep that share growing.
• Then, divide your company’s annual sales revenue by the total market spending to get your market share.

When applied appropriately, it can shed valuable light on the future prospects of a company. Analyzing market share comes with its own set of challenges and potential pitfalls that businesses must navigate to ensure accurate interpretation and effective decision-making. Understanding these challenges is essential for mitigating risks and maximizing the value derived from market share analysis. Implementing a combination of these methods tailored to your business’s unique strengths, market conditions, and target audience can help drive sustained growth and increase your market share over time. Market share analysis plays a crucial role in evaluating the effectiveness of your marketing strategies and campaigns. By tracking changes in market share following marketing initiatives, you can assess their impact on your brand’s visibility, customer engagement, and market penetration.

What Is Market Share Formula?

• Simply using revenue figures alone is no longer enough to keep up with the speed of change that most markets are experiencing.
• As mentioned earlier, it is more difficult to acquire new customers than to keep the old ones.
• Market share, in the simplest of terms, is a company’s sales percentage in relation to the overall sales in a specific market or industry.
• However, the value depends on the type of market the company is operating in, the category of products being produced, and the time frame for the analysis.
• There are several benchmarks that brands can use to assess the health of their business.

It is critical for this product or service to be good enough to attract a customer base. Also, the company must be able to take into consideration the preferences of consumers in order to maintain its leadership. After calculating the individual company sales, the next step is to calculate the aggregate sales of the industry, that is the total sales for the entire market.

Marketing and Advertising Campaigns

Although it may be more challenging to assess a new company’s market share, doing so is essential. To calculate relative market share, divide your share by that of your most direct rival, then multiply the result by 100. The outcome will reveal how much of the market you hold compared to your primary opponent.

Identifying Growth Opportunities

The more competitors you collect data from, the more accurate your market share calculation will be. Let’s explain how to calculate market share of different values step by step. Relative market share shows what proportion of the market you serve compared to your strongest rival. Let’s have a look at the streaming music industry and Spotify’s market share. According to a Forbes article in April 2022, Spotify commanded 31 percent of the streaming audio services market in Q1 2022.

Understanding the benefits of monitoring market share is crucial for businesses seeking to gain a competitive edge and drive growth. By tracking and analyzing market share data, companies can unlock valuable insights that inform strategic decision-making across various aspects of their operations. Consider the smartphone market, where major players like Apple, Samsung, and Huawei compete for market share.

Imagine you have a toy market where last year, a total of 1,000 toys were sold. For example, they might introduce new technology to attract customers that would otherwise have purchased from a competitor. Or they might acquire one or more competitors to scoop up their share of the market and narrow the field. Changes in market share have a more important meaning in the performance of companies in mature and traditional industries, where there is known and steady growth in line with the general economy.

Increase your brand awareness

As seen above, market shares are measurable either by the volume of goods or the value of those goods. In many cases, pioneers lose their market lead and initial market share to imitators who capitalize on the areas of weakness of the pioneers. Even as a firm needs to increase its revenue, it should also keep an eye on its market share because it is the real indicator of a firm’s growth as well as its market position. It is evident that aside from prices, customers are becoming more conscious of product quality. By ensuring higher quality standards, a firm can bring about an increase in its market share. Market Share is the percentage of a market controlled by a business or brand, reflecting competitiveness and dominance.

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