In the marketing industry, you’ve likely heard the term “market share” from time to time, but what does it mean? Why is it necessary, and how is it calculated?
As marketers, it’s important to understand market share so you know how your company ranks against competitors and can develop new marketing strategies to reach more potential customers. In this post, we’ll outline what market share is, how to calculate it, give real-life examples, and explain how you can increase yours.
What is market share?
Market share is the percentage of an industry’s sales that a particular company owns. Essentially, it is the share of your business’s total industry revenue from selling your products and services. Businesses with larger market shares are industry leaders and competition for smaller companies.
Suppose consumers buy 100 T-shirts, and 70 are from Company A, 25 from Company B, and 5 from Company C. In that case, Company A owns a market share of 70% and is the leading industry competitor.
Market share is typically calculated for a specific period, like yearly or quarterly sales, and is sometimes separated by region.
How to Calculate Market Share
Find your business’s total sales revenue for your preferred period and divide that number by your industry’s total revenue during the same period. Once you have this result, multiply the number by 100 to generate your market share percentage.
Market Share Formula
Relative Market Share
Relative market share compares your performance to industry leaders.
Rather than using total industry revenue, you’re dividing your market share by your top competitor’s market share, multiplying the result by 100. The result will show you the portion of the market you own in relation to your most significant competitor. The image below shows the relative market share formula.
Relative Market Share Formula
Market Share Examples
It may be easier to understand market share with real-life examples, so we’ll go over some below for businesses you may already be familiar with.
Nike Market Share
Nike is part of the athletic footwear and apparel industry, selling various sports equipment, casual shoes, and accessories.
Nike’s global market share in sportswear is estimated to be 43.7%. The brand is an industry competitor for Adidas and Under Armour.
Tesla Market Share
Tesla is part of the automotive industry and produces electric vehicles (EVs). Within the U.S. EV industry, Tesla holds an over 70% market share.
It’s essential to recognize that the market for EVs worldwide is significantly smaller than standard vehicles. EV’s market share in the automobile industry is 2.8%, and Tesla’s is .8%. These differences are significant, so it is vital to analyze relative market share to compare your business to your direct competitors rather than just the market as a whole.
Spotify is a music-streaming platform and has the highest music-streaming market share with 31% of the market.
The second-highest market share belongs to Apple Music (15%), followed by Amazon Music (13), Tencent (13%), and YouTube (8%).
E-commerce company Amazon has a U.S. e-commerce market share of 37.8% and is the leading online retailer in the country. Second place belongs to Walmart with 6.3%, and third place goes to Apple with 3.9%.
Most recent statistics show Target is the largest department store retailer in the U.S. with a 38% market share. Walmart and Macy’s both rank second with 13%.
Chew is an online pet product and food retailer with a market share of 40% in the U.S. The company plans to expand into the global market in 2024 and is expected to gain a 20% market share outside of the U.S. by 2030.
Google Market Share
Google has a market share of 92.37%, 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 3.57%.
How To Expand Your Market Share
Below are a few strategies your company can use to expand your market share.
1. Lower prices.
A great way to compete in your industry is to offer low prices. This is the low-hanging fruit of expanding your market share because consumers typically look for lower-cost products.
However, it’s also important to note that the cheap option isn’t right for every brand. You want to ensure that you’re pricing products appropriately to provide value to customers but not lose out on revenue opportunities to beat the competition.
2. Innovate new products and features.
Companies innovating and bringing new technology to the table often see their market share increase.
New products and features attract new customers, also known as acquisition, which is a driving factor for generating revenue. New customers make new purchases and, in turn, contribute to higher profit margins and larger contributions to overall industry revenue. More significant contributions directly translate to increased market share.
3. Delight your customers.
One of the best ways to grow your market share is to work on existing customer relationships.
You can inspire customer loyalty by delighting current customers by providing exceptional experiences and customer loyalty. Loyal customers are more likely to make repeat purchases, which increases your business revenue and contribution to total industry revenue. As mentioned above, higher revenue contributions equal a higher market share percentage.https://www.youtube.com/embed/dtPKZCW73jk
4. Increase brand awareness.
Branding awareness and national marketing play a significant role in capturing market share. Getting your name out there is important, so customers know who you are. Becoming a household name and the preferred brand in an industry will help increase your market share.
Generally, larger companies have the highest market share because they can provide products and services more efficiently and effectively.
But why is this so important? Below, let’s figure out what impact market share can have on your company.
Why is market share important?
Calculating market share lets companies know how competitive they are in their industry. Additionally, the more market share a company has, the more innovative, appealing, and marketable they are.
Market share is more important in industries that are based on discretionary income. Market share doesn’t always have a significant impact in constantly growing industries. However, it’s important to remember that a company can have too much market share — also known as a monopoly.
For example, with growing industries with a growing market share, companies can still increase their sales even if they lose market share.
On the other hand, with discretionary income industries, such as travel or non-essential goods like entertainment and leisure, the economy can significantly impact market share. Sales and margins can vary depending on the time of year, meaning that competition is always at an all-time high.
Higher competition often leads to risky strategies. For instance, companies might be willing to lose money temporarily 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 shares can let you know that you need to focus on customer acquisition, marketing to raise brand awareness, and overall strategies to increase revenue. Higher percentages indicate that your current plan is adequate and that you should focus on customer retention and product innovation.
Whether your company is well-established or just starting, it’s important to understand your industry standing as it will help you meet business objectives and achieve desired success.