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Market Share

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What is Market Share?
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What is Market Share?

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Definition of Market Share

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 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 share over time is growing its revenues in line with its competitors. But an increase shows a speedier, market-leading, boost in revenue.

Why is market share important?

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 responsibilities in the market also indicates how successful your business is in relation to competitors, and how effective your marketing, advertising, and new product development have been.

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Understanding and analyzing market share is vital for an organization looking to scale up or improve profitability. Fluctuations are usually indicators of a company’s competitive advantage, which can be extremely important information for investors and for stock performance.

How to gain market share

Companies looking to increase their 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.

General FAQ

How is market share calculated?
Market share may be calculated by dividing a business’s total revenue or sales by the industry’s total sales across the relevant fiscal period. This reveals the company’s share of the industry’s overall sales.
What is the relative market share?
This marketing metric allows companies to compare their market share with that of their biggest competitor. The market leader’s share serves as the benchmark for comparisons of smaller competitors, too.
What is an example of market share?
If a business selling $20 million’s worth of a product in one year, and the total market is worth $40 million, the brand’s market share would be 50%.

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