Market Share Formula
Market share is typically measured as your sales as a percentage of the total market size as follows.Market share = (revenue / total-market-size) × 100Both revenue and total market size are dollar amounts. It is also possible to calculate market share using unit sales:Market share = (units-sold / market-units-sold) × 100Defining Your Market
Selecting an appropriate market for comparison is a key element of market share analysis. There are several ways to define a market:- industry- regional market- product category- segment or niche- a set of specific competitorsFor example, a German manufacturer of city bicycles could define their market as the entire global transportation industry but this is probably too broad to generate a meaningful metric. As such, they might compare their sales to their four largest competitors or define their market as the "European market for city bicycles."Comparable Revenue
The data required for market share analysis includes your revenue that is comparable to your market definition. Any revenue that isn't directly comparable is excluded. If your market is the European market for city bicycles than you would exclude revenue from Asia and other product categories such as sports bicycles.Total Market Size
Total market size can be calculated or estimated using data provided by governments, industry groups or market research firms. In many cases, the revenue of your competitors is available in their public financial disclosures and press releases.Example #1
A Japanese beverage company launches a line of non-alcoholic beers with sales of $5 million. They estimate the total market size of non-alcoholic beers in Japan at $120 million by looking at the earnings of their major competitors.market share = (5/120) × 100 = 4.2%Example #2
In some cases, market share is measured in users. For example, a streaming media service might benchmark its 10 million active users against the 90 million people in the United States who subscribe to a similar service.market share = (10 / 90) × 100 = 11.1%Example #3
A third way to measure a market is using unit sales. This is done when you have better unit sales data than revenue data for a market. Unit sales can also be used if you're products are at a completely different price level than the competition such as a $100 mobile device with a strategy to take the market of a $1000 mobile device. For example, if you sell 1 million devices in a market where a total of 4.4 million devices are sold:market share = (1/4.4) × 100 = 22.7%| Overview: Market Share Analysis | ||
Type | ||
Definition (1) | The process of benchmarking your sales against the total size of a market. | |
Definition (2) | The process of benchmarking your sales in a product category against the competition. | |
Formula | market share=(your-sales/all-sales) × 100 | |
Related Concepts | ||
