When I grew up, I played “grocery” with my sister. We went to our pantry, took out all the groceries, and set up a grocery store in our living room. I would normally “buy” goldfish.
You may be thinking, “What does this have to do with market share?”
Let’s say I bought 10 bags of goldfish from various “companies” that my sister, mother, and father owned. If three of these bags were my sister’s goldfish, it would mean she had a 30% market share of my goldfish.
Simply put, that’s market share. But how does this affect marketers?
As a marketer, it’s important to understand market share so you can understand how your business is doing against competitors and develop new marketing strategies to reach more potential customers. In this post we describe what market share is, how it is calculated, give practical examples and explain how you can increase your market share.
What is market share?
Market share is the percentage of an industry’s revenue that a particular company owns. Essentially, this is the percentage of the total industry revenue that your company generated from selling your products and services. Companies with larger market shares lead the industry and compete for smaller companies.
Think of it this way: if consumers buy 100 t-shirts and 70 of them are from Company A, 25 from Company B, and 5 from Company C, Company A has a 70% market share and is the leading industry competitor.
The market share is usually calculated for a certain period of time, e.g. For annual or quarterly sales, and sometimes by region.
How to calculate market shares
Since you are likely already tracking sales data, calculating your market share is a straightforward process. Simply find the total sales of your company for your preferred time period and divide this number by the total sales of your industry for the same time period. Once you get that result, multiply the number by 100 to generate your market share.
Market share formula
Calculating your market share will give you a thorough understanding of your position in the industry. However, it is also helpful to understand how you measure yourself against your direct competitors.
Relative market share
With a relative market share, you can compare your performance with industry leaders.
Instead of using all of your industry sales, divide your market share by the market share of your top competitors and multiply the result by 100. The result shows you the market share you have in relation to your largest competitor. The picture below shows the relative market share formula.
Relative market share formula
Examples of market shares
It may be easier to understand market share through real-world examples. So, below, we’re going to provide some examples of companies that you may already be familiar with.
Nike market share
Nike is part of the athletic footwear and apparel industry and sells a wide variety of sports equipment, casual shoes, and accessories.
With shoes alone, Nike’s global market share is estimated at 29.25%. The brand is an industry competitor for Adidas and Under Armor.
Tesla market share
Tesla is part of the automotive industry and produces electric vehicles (EV). Within the EV industry, Tesla has a market share of 18%.
While this number may seem small, it’s important to realize that the market for electric vehicles worldwide is significantly smaller than that for standard vehicles. EV’s market share in the automotive industry is 2.8% and Tesla’s 0.8%. These differences are significant. For this reason, it is important to analyze relative market share in order to compare your company to your direct competitors, and not just the market as a whole.
Google market share
Google has a market share of 91.86%, making it the most popular search engine in the world. It dominates the competition as the second largest industry leader is Bing with a market share of just 2.71%.
Once you have calculated your market share and understood how you relate to your industry competitors, you can begin strategy on how to increase your overall sales.
How to expand your market share
Below are some strategies your company can use to grow your market share.
1. Lower prices.
A great way to assert yourself in your industry is to offer low prices. This is the low hanging fruit of expanding your market share as consumers typically look for lower cost products.
However, it’s also important to note that the cheap option isn’t the right move for every brand. You want to make sure that you rate products appropriately to add value to customers, but don’t miss out on sales opportunities to beat the competition.
2. Innovate new products and functions.
Companies that are innovative and bring new technology to the table often see their market share increase.
New products and features attract new customers, an acquisition that is a driver of revenue generation. New customers make new purchases and, in turn, contribute to higher profit margins and greater contributions to overall industry revenue. Larger contributions lead directly to an increased market share.
3. Delight your customers.
One of the best ways to increase your market share is to work on existing customer relationships.
By inspiring current customers with extraordinary experiences, you can promote customer loyalty. Loyal customers are more likely to make repeat purchases, increasing your business revenue and your contribution to overall industry revenue. As mentioned above, higher sales contributions correspond to higher market share.
4. Increase brand awareness.
Brand awareness and national marketing play a huge role in gaining market share. It’s important to get your name out there so customers know who you are. When you become a household name and brand of choice in an industry, you can increase your market share.
In general, larger companies have the highest market share because they can deliver products and services more efficiently and effectively.
But why is it so important? Let’s find out below what impact market share can have on your business.
Why is market share important?
By calculating market share, companies know how competitive they are in their industry. The more market shares a company has, the more innovative, appealing and marketable they are, as a rule.
Market share is more important in industries that rely on discretionary revenue. In industries that are growing all the time, market share doesn’t always have a big impact. However, it is important to remember that a company can have too much market share – also known as a monopoly.
For example, companies in growing industries with a growing available market share can increase their sales even if they are losing market share.
On the other hand, in industries with discretionary income such as travel or non-essential goods such as entertainment and leisure, the economy can have a significant impact on market share. Sales and margins can vary depending on the time of year, which means that competition is always at an all-time high.
Higher competition often leads to risky strategies. For example, companies might be willing to temporarily lose money in order to force competitors out of the industry and gain more market share. Once they have more market share, they can raise prices.
Understand your market share to increase business success
Lower market share can indicate that you need to focus on customer acquisition, marketing to increase brand awareness, and general strategies to increase sales. Higher percentages indicate that your current strategy is effective and you should focus your efforts on customer loyalty and product innovation.
Whether your company is well established or just starting out, understanding your company’s industry position is important as this will help you meet the business goals and achieve the success you want.