A company's market share is said to be the percentage of total sales in an industry. In other terms, if you operate in a $1 market and make $100 million in annual revenue, your market share is 1%. Additionally, it is not always about sales in the internet world. In the case of Facebook, for example, their primary service – social networking — is free. They obtain advertising dollars from a unique market, that of online advertising.

What does this mean for marketers? As marketers, it is critical to evaluate market share so that you may understand how your firm compares to competitors and design new marketing strategies to attract more potential customers. In this post, we'll define market share, explain how to calculate it, provide real-world examples, and discuss how you can raise yours.

What exactly is market share?

A company's market share is said to be the percentage of an industry's revenues. Essentially, it is the percentage of overall industry income your company generates from selling its products and services. Larger market share firms are industry leaders and competitors for smaller enterprises.

Consider this: if 100 people buy t-shirts, 70 of them buy from company A, 25 from company B, and five from company C. Company A has a 70% market share and is the leading industry rival. Market share is usually calculated for a given period, such as annual or quarterly sales, and is frequently broken down by region.

How is Market Share Calculated?

There are several popular methods for calculating market share:

The traditional market share methodology is based on the industry's total sales.

Because the customer market share calculation is customer-centric, you must know the absolute number of customers in your market.

The relative market share methodology is based on the market shares of the top players in your industry.

The market share growth formula is related to all three of the above, and it allows you to understand how your market share has changed over time.

However, traffic can easily replace sales and customers in the online world, as the former figures might be challenging to grasp unless you're working with a market full of publicly traded corporations.

Market share formula

Assume you sell shoes and your total sales for the quarter were $100,000. Total industry sales were $1,000,000 during the same period, and 10% of the market would be yours. The actual formula would be as follows:

$100,000 divided by $1,000,000 equals 0.10 x 100 = 10% market share.

This metric will give you an overall picture of your company's position in the industry. Try, however, to compare yourself to direct competitors. Otherwise, this will be a useless measure for you to monitor.

Conclusion 

Lower market shares indicate that you need to focus on client acquisition, marketing to boost brand awareness, and overall revenue-growth tactics. Higher percentages suggest that your current strategy is working, and you should prioritize client retention and product innovation.

Whether your business is well-established or just starting, understanding your industry standing is critical since it will assist you in reaching business objectives and achieving the desired success.