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How to calculate market share

How to Calculate Market Share

Market share is an important metric for businesses to track. It represents the percentage of a market’s total sales that a particular company or product holds. Knowing your market share can help you understand your position in the market, identify opportunities for growth, and make informed decisions about pricing and marketing strategies.

Why is market share important?

Market share is important for several reasons:

  • It shows how well your company or product is performing in the market compared to competitors.
  • It helps you identify growth opportunities by understanding where you stand in the market.
  • It informs pricing strategies by giving you a sense of how much pricing power you have in the market.
  • It helps you make informed decisions about marketing strategies by giving you a sense of how much visibility you have in the market.

How to calculate market share

Calculating market share is a relatively straightforward process. Here’s how to do it:

  1. Determine your company or product’s total sales revenue for a given period of time.
  2. Determine the total sales revenue for the market you’re operating in for the same period of time.
  3. Divide your company or product’s total sales revenue by the total sales revenue for the market to get your market share percentage.

Here’s an example:

Let’s say your company sells widgets, and your total sales revenue for the year is $1 million. The total sales revenue for the widget market for the year is $10 million. To calculate your market share percentage, divide your company’s total sales revenue by the total sales revenue for the market:

Market share percentage = (your company’s total sales revenue / total sales revenue for the market) x 100

Market share percentage = ($1 million / $10 million) x 100 = 10%

In this example, your company has a 10% market share of the widget market.

Types of market share

There are several different types of market share that businesses can track:

  • Total market share: This is the percentage of total sales revenue in a market that a particular company holds.
  • Relative market share: This is the percentage of market share that a company holds compared to its largest competitor.
  • Served market share: This is the percentage of a market that a company serves, based on the specific products or services it offers.
  • Available market share: This is the percentage of a market that a company could potentially serve, based on the total demand for the products or services it offers.

How to improve market share

If your market share isn’t where you want it to be, there are several strategies you can use to improve it:

  • Increase visibility: Invest in marketing and advertising to increase your company’s visibility in the market.
  • Improve product quality: If your product isn’t performing as well as competitors, invest in improving its quality.
  • Lower prices: If your pricing is higher than competitors, consider lowering your prices to become more competitive.
  • Expand product line: Offer new products or services to capture a larger share of the market.

Conclusion

Calculating market share is an important part of understanding your company’s position in the market. By tracking your market share, you can identify growth opportunities, make informed pricing and marketing decisions, and ultimately improve your company’s performance in the market.

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