What Is Market Share and How Is It Determined?

You’ve probably heard the phrase “market share” used occasionally in the marketing world, but what does it actually mean? What justifies its requirement, and how is it determined?

During a meeting, a woman talks about market share.
Understanding market share is crucial for marketers since it allows you to see how your business compares to rivals and create new marketing plans to attract more potential clients. In this article, we’ll define market share, demonstrate how to calculate it, provide examples from real-world situations, and explain how you can raise your own.
Market share: what is it?
Market share is the portion of a sector’s sales that a specific company controls. In essence, it is the portion of your company’s overall industry revenue that comes from selling its goods and services. Larger market share companies are leaders in their industries and smaller companies must compete with them.

Consider a scenario where customers purchase 100 T-shirts, of which 70 come from Company A, 25 from Company B, and 5 from Company C. In that scenario, Company A is the main rival in the business and holds a 70% market share.

Market share is frequently determined for a given time period, such as annual or quarterly sales, and is occasionally broken down by region.

Methods for Estimating Market Share
Divide the entire sales revenue for your company for the selected time period by the same period’s total sales revenue for your industry. To determine your market share %, multiply the figure by 100 once you have it.

You can use the market share formula to determine your company’s market share.

You can have a general picture of where you are in the market by calculating your market share, but it’s also useful to know how you compare to your main rivals.

Percentage of the Market
Relative market share contrasts your accomplishments with those of your competitors.

Instead of using the overall industry revenue, you divide your market share by the market share of your leading rival, then multiply the result by 100. The outcome will show you how much of the market you control in proportion to your biggest rival. The relative market share formula is displayed in the graphic below.

Relative Market Share Formula: A mathematical formula for determining the relative market share of your company

Examples of Market Shares
Real-world examples will help you better grasp market share, so we’ve included several below for companies you may be familiar with.

Market share for Nike
Nike sells a range of sports gear, street shoes, and accessories as part of the athletic footwear and clothing market.

43.7% of the worldwide sportswear market is believed to be owned by Nike. The company competes with Adidas and Under Armour in the market.

Market Share for Tesla
Tesla creates electric automobiles and is a player in the automotive business (EVs). Tesla has a market share of more than 70% in the American EV market.

It’s critical to understand that the global market for EVs is far lower than that for conventional vehicles. Tesla has a market share of.8%, compared to EV’s 2.8% in the automotive sector. Because of these distinctions, relative market share analysis is essential when comparing your company to its immediate competitors rather than the market as a whole.

With 31% of the market, Spotify, a platform for streaming music, has the highest share of the industry.

Apple Music has the second-highest market share (15%), followed by YouTube (8%) and Amazon Music (13%).

Amazon is an online retailer. The largest online retailer in the US, Amazon, with a 37.8% market share in e-commerce. With 6.3%, Walmart is in second place, and Apple is in third with 3.9%.

According to the most recent figures, Target holds a 38% market share and is the biggest department store retailer in the United States. With 13%, Walmart and Macy’s are tied for second place.

A 40% market share in the United States is held by the online pet product and food shop Chewy Chew. The business anticipates entering the international market in 2024 and achieving a 20% market share outside of the United States by 2030.

Market share for Google
Google is the most widely used search engine in the world with a market share of 92.37%. With just a 3.57% market share, Bing, the second-largest player in the sector, has little chance of challenging it.

You can start formulating a plan to boost your overall revenue after calculating your market share and determining how you stack up against your sector’s rivals.
Tips For Increasing Your Market Share
Here are a few methods your business might employ to increase its market share.

1. Price reductions
Offering inexpensive costs is a terrific strategy to compete in your industry. This is the easiest way to increase your market share because customers frequently seek out cheaper goods.

It’s crucial to remember, though, that not every brand should go with the less expensive choice. To provide clients with value and not miss out on sales opportunities to outperform the competition, make sure your product prices are acceptable.

2. Create new features and products.
Companies that innovate and introduce new technologies frequently see a gain in market share.

Acquisition, another name for attracting new clients, is a key element in producing money. New features and goods do this. New customers make new purchases, which results in increased profit margins and greater revenue contributions for the entire industry. Increased market share results directly from more important contributions.

3. Make your consumers happy.
Working on current client connections is among the finest strategies to increase your market share.

By giving excellent experiences and customer loyalty to your present clients, you can encourage their loyalty. Repeat business from loyal clients boosts your company’s revenue and its contribution to the sector’s overall revenue. As was already established, a bigger market share % results from higher revenue contributions.

4. Raise brand recognition.
Gaining market share depends heavily on branding recognition and national marketing. Getting your name out there is crucial so that clients are aware of you. You can expand your market share by becoming the go-to brand in a certain industry and a household name.

Larger businesses typically have the largest market shares because they can deliver goods and services more effectively and efficiently.

But why is this such a big deal? Let’s examine what effect market share may have on your business in the sections below.

What makes market share crucial?
Businesses can determine their level of industry competition by calculating their market share. A corporation becomes more inventive, alluring, and marketable as its market share increases.

Market share is particularly significant in sectors that depend on disposable income. Market share doesn’t necessarily have a big effect on industries that are expanding constantly. A corporation might, however, have an excessive amount of market share, which is referred to as a monopoly.

Companies can improve their revenues even if they lose market share, for instance, in rising industries with growing market shares.

On the other side, the economy can have a big impact on market share in sectors that rely on discretionary money, such as travel or non-essential items like entertainment and recreation. Because sales and profits might change depending on the season, there is always fierce rivalry.

Risky techniques frequently result from increased competition. For instance, businesses might be prepared to endure short-term financial losses in order to drive rivals out of the market and increase their market dominance. They can raise pricing once they have a larger market share.

Knowing Your Market Share Will Boost Your Business Success
Lower market shares can alert you to the need to concentrate on customer acquisition, brand awareness marketing, and general revenue-boosting initiatives. Higher percentages suggest that your existing strategy is sufficient and that you should concentrate on increasing client loyalty and developing new products.

Understanding your industry’s position is crucial whether your organization is well-established or just getting started since it will help you fulfill your goals and succeed.

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