What Is Market Share & How Do You Calculate It? Formula

Calculate the market share of company B based on the available information. While market share is all about sales, your focus should not only be on your customers and the external market. Companies with the highest market share in their industries tend to have the most skilled and dedicated employees. That’s because bringing the best employees on board reduces expenses related to turnover and training, which in turn enables companies to devote more resources to focus on core competencies. A key step in the talent management process is to find out how engaged your employees are.

1. For example, a subscription-based business model may allow a startup to capture a larger share of its target market than a one-time purchase model.
2. By studying the tactics, methodologies, and approaches adopted by successful companies, businesses can gain inspiration and insights to replicate or adapt these strategies to their specific contexts.
3. This gives a proportionate percentage of the company among its operating industry.
4. The best method of market share calculation depends on the industry and the methods available.
5. Beyond all this, increased market share is important because it brings its own set of benefits that can help things grow exponentially.

This is the ratio between the clicks you get out of the total available clicks for a defined set of keywords. A low market share tells you that your business holds a smaller share of the market, while a high market share highlights that how to calculate market share your business holds a larger share of the market. This percentage is also referred to as absolute market share or revenue market share. Use this tool to learn from the market leaders and their successful tactics for ongoing growth.

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That’s why we recommend gathering market share data not just as a one-off task, but as a regular activity that’s a core and crucial part of your competitive strategy. Market share data can help you identify if competitors are making strategic moves that are driving their sales and alert you if you need to take competitive action. By strengthening customer relationships, companies protect their existing market share by preventing current customers from jumping ship when a competitor rolls out a hot new offer. Better still, companies can grow market share using the same simple tactic, as satisfied customers frequently speak of their positive experience to friends and relatives who then become new customers.

Market Share Example

A segmentation survey will help you understand if your customers are bargain hunters or have a preference for higher quality products and services. Understanding your company’s market share can help you gauge its size relative to its competitors and the industry. By monitoring it over time — say once a quarter — investors may see which businesses are growing and which are losing ground in the market and identify potential targets for espionage. Say, for example, the purchasing activity of consumers as a whole is 100 tubes of toothpaste, and a certain toothpaste maker sells 60 tubes. The calculation of market share takes into consideration a company’s total sales over a particular time period and the total sales of the industry in which it operates over that period. Investors look at changes in market share as a possible sign of the relative competitiveness of a company’s products or services.

However, independent agencies and regulatory bodies regularly gather market share and comparable data for fast-growing sectors and existing markets. In short, knowing your market share will give you an idea of where you stand within your industry and how you stack up against your immediate competitors. Relative market share indicates its performance compared to its primary rival. Relative market share is a proportion of the top earner’s sales, whereas market share represents the company’s overall sales in the market. With an increase in market share, a company increases its dominance over the industry it operates in.

Had Tesla not done a deep market share analysis, the company might have missed the opportunity to truly own the market. With these questions in mind, you’ll be able to sort through your data and develop clear insights that will inform your strategy and help your business grow. Strengthen customer relationships and build their loyalty to prevent customers from choosing a competitor if they come up with discounts or new offers.

Reduce Prices with Better Quality

Building customer loyalty is an important technique to gain market share. Strengthening customer relationships would help the companies protect their existing hold on the market by avoiding the exit of present customers due to attractive https://business-accounting.net/ offers by competitors. By focusing on relationship building, companies can build customer satisfaction which would help in increasing customer base due to word-of-mouth from the satisfied customers to their near and dear ones.

Firstly, it provides businesses with insights into their market performance and competitiveness. By understanding their growth rate, companies can determine whether they are outperforming or lagging behind their competitors and take appropriate action accordingly. Secondly, market share growth rate calculation enables businesses to evaluate the effectiveness of their strategies and initiatives aimed at increasing market share. By analyzing the outcomes of their efforts, companies can refine their approaches and identify new opportunities for growth. Analyzing competitors’ market share growth rates provides businesses with a competitive advantage.

The notion that offering the most innovative products and services mix can increase market share certainly has its merits. Doing deeper analysis, it was determined that the toy company sold to 10,000 customers during the first quarter. Although the company’s market share in terms of dollars was 25%, the company’s market share as a factor of total customers was 32%. Market share increases can allow a company to achieve greater scale with its operations and improve profitability.

Market share by units sold

But this is a hard-fought, endless battle – one that relies on a continuous barrage of brand-building marketing, rather than product innovation or pricing. In fact, in the mid-2000s Pepsi commanded a far chunkier 30% of the market. A good reputation, in turn, helps boost sales and broaden the customer base.

This will help you identify which segments are growing the fastest and where you need to focus your resources. If you’re like most startup founders, you’re always looking for ways to improve your company’s performance. If you’re considering conducting a market share assessment, then there are a few things you need to keep in mind. First and foremost, you need to make sure that you’re using the right data. There are a number of different sources of data that you can use, but not all of them will be equally reliable.

IG International Limited receives services from other members of the IG Group including IG Markets Limited. Let’s take an example to understand the calculation of Market Share in a better manner. Learn more about market sizing from Momentive, the maker of SurveyMonkey. You’ll get all our exclusive tips, tricks and handy resources sent straight to your inbox. Hear from HydroWorx, who saw a 236% increase in organic sessions with WebFX services. Access and download collection of free Templates to help power your productivity and performance.

Or, you may have the highest revenue and the most product sales, but you overspend on paid ads and affiliate marketing which reduces your profit margins. You may even have a high market share in one specific market, but almost no penetration overall within the industry. Another way Coca-Cola discovered that it could increase market share was by diversifying its portfolio of products to include other types of drinks such as Vitaminwater.