Market Share is, very simply, the percentage of a certain sector that your product, service or software is responsible for, calculated by sales.
Market share is used to give you an idea of how large, powerful or important your business is within its particular sector. You can calculate your market share by taking your total sales and dividing the figure by the total sales of the entire sector or market you are selling in.
A company that maintains its market share over time is growing its revenues in line with its competitors. But an increase in market share shows a speedier, market-leading, boost in revenue.
Market share is a useful metric, delivering insights far beyond illustrating an organization’s relative size within the market it is operating in.
Knowing your market share also indicates how successful your business is in relation to competitors, and how effective your marketing, advertising, and new product development have been.
Understanding and analyzing market share is vital for an organization looking to scale up or improve profitability. Fluctuations in market share are usually indicators of a company’s competitiveness, which can be extremely important information for investors and for stock performance.
Companies looking to increase their market share have a few options. They can look to marketing and advertising to attract new customers, develop new products for the market, lower prices to undercut the competition, or attempt to expand the size of their target market by appealing to new demographics.
Innovation and disruption are also great ways of increasing market share. After all, offering a new technology — one that competitors do not have access to — is a highly effective way of convincing users to migrate to your product or service.