As a seasoned marketer, it’s crucial to understand your company’s market share to evaluate your competitive standing and craft impactful marketing strategies. However, what precisely is market share, and how can it be calculated?This article delves into the concept of market share, its calculation methods, and strategies to enhance your market share online. Here’s an overview of the topics we’ll explore:
What Is Market Share?
What Is Relative Market Share?
Why Is Market Share Significant?
How To Calculate Market Share
How To Calculate Relative Market Share
How To Calculate Market Share For New Businesses
How To Increase Your Market Share Online
A company’s market share represents the portion of its revenues within a specific market or sector. It is the percentage of the total industry revenue that your company’s goods and services contribute. Competition stems from both industry leaders and smaller businesses.Relative market share reflects its performance against the primary rival. While market share represents the company’s overall sales in the market, relative market share is the proportion of the top earner’s sales.Understanding your company’s market share helps assess its size relative to competitors and the industry. By tracking it over time, investors can identify market trends, growing businesses, and potential espionage targets.The division of the market among various players reveals insights into the industry’s state, from competition levels to market dominance by small businesses or broader consumer preference shifts.Calculating a company’s market share involves dividing total sales for a product, service, or industry by those of your company over the same period. This metric offers a comprehensive view of the company’s size within the industry and against rivals.
For instance, if “New Fashion,” an American clothing retailer, has annual sales of $1.5 billion and the US clothing market totals $100 billion, it holds a 1.5% share of the retail market.Calculation: Market share = 1.5/100 * 100 = 1.5%Understanding your market share provides insight into your industry position and competitive advantage.Relative market share is calculated by dividing your share by your primary rival’s share, then multiplying by 100. This reveals your market presence compared to the leading competitor. Refer to the formula below for a detailed explanation.
For example, if the leading player in the US clothing market has a 25% share, New Fashion’s 1.5% share equals a 6% relative market share.Calculation: Relative market share = (1.5/25 = 0.06) * 100 = 6%Understanding this metric allows potential investors to gauge New Fashion’s market position relative to the industry leader.Accurate market share data for new enterprises or sectors can be difficult to obtain due to limited demand for tracking such data. However, independent agencies and regulatory bodies regularly collect market share and comparable data for emerging sectors and established markets.For a new company entering an established market, determining market share can be as simple as comparing sales (or another relevant statistic) to the market’s total sales.Although it may be challenging to know the exact market segment percentages in the United States, understanding the market’s overall product or service sales is even more difficult.For instance, if New Fashion sells $5 million in apparel in the US in its first year and the country spends $500 million on clothing, it holds a 10% market share.However, evaluating New Fashion’s market share against competitors and its industry size can be challenging under these conditions.When determining a new company’s market share, consider the scale (national or international) and whether the analysis covers the entire company’s sales or a specific product line.While assessing a new company’s market share may be challenging, it is crucial for stakeholders to monitor its development and success in penetrating the market.Several strategies can be employed to increase market share and become the industry leader. However, long-term planning is essential to sustain growth and capitalize on existing momentum.Follow these steps to achieve success. WebFX can assist you in developing a tailored market development strategy and expanding your online presence. Our digital marketing services will help you attract more leads and increase revenue, fueling business growth.Contact us online or call 888-601-5359 to speak with one of our strategists and learn how we can help your business dominate the industry!
