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Glossary – Market share

Market share

Nikiforov Alexander
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What is market share?

Market share represents the percentage of total sales in a specific market or its segment that belongs to a particular company or product. This metric allows for the assessment of relative sales volume over a given period—be it a year, quarter, or month. Companies can calculate their share both in the overall market and within specific segments. For example, one can analyze the sales share in the furniture market in a specific country or in the segment of soft sofas. Data visualization can help display the market shares of companies in the online streaming sector.

Why is market share important?

Knowing a company's market share provides marketers with numerous opportunities for analysis and improvement of business strategies. Let's consider several key aspects:

  • Determining market position: Market share helps assess the competitiveness of a company or a specific product.
  • Evaluating marketing strategy: If market share is decreasing, it may indicate that competitors are executing more successful actions. In the case of growth, the company's strategic efforts may be effective.
  • Studying product popularity: When launching a new product, the dynamics of market share growth allows for assessing its prospects. Slow growth may signal the need to change the promotional approach.
  • Analyzing competition: Calculating market share helps understand the structure of competition—from monopoly to monopsony.

However, it is important to note that market share alone does not provide a complete picture and should be analyzed alongside other financial indicators such as revenue and profit.

How to calculate market share?

To calculate market share, it is necessary to determine the period over which sales will be tracked. Typically, the metric is calculated quarterly, but in rapidly changing market conditions, more frequent analysis may be required. Here are several basic calculation methods:

  • In physical units: This allows for assessing the sales volume in product units. For example, if the total smartphone market volume is 2000 units and the company sold 500, the market share would be 25%.
  • In monetary terms: It is necessary to know the total sales volume to compute the metric. If the market volume is 50 million rubles and the company sold products worth 15 million, the market share will be 30%.
  • Determining market volume: This can be done in two ways: "bottom-up," based on consumption and the number of buyers, or "top-down," using public data and company reports.
  • Relative market share: If it is impossible to calculate the total market volume, the metric can be computed relative to the nearest competitors or industry leaders.

Additional methods, such as the Parfitt and Collins method, use more complex calculations based on brand penetration, repeat purchases, and consumption intensity.

How to increase market share?

To increase market share, companies should enhance their marketing strategies. Here are several effective techniques:

  • Revising pricing policy: Compare prices with competitors and optimize pricing. For example, pricing automation helped one company increase sales by 32%.
  • Improving product quality: Implement new technologies and enhance functionality to attract new customers.
  • Increasing customer loyalty: Use loyalty programs and promotions to encourage repeat purchases.
  • Training employees: Motivated and qualified staff provide a positive customer experience.
  • Active advertising: Utilize all available channels to promote the product, which will help increase its recognition.

By implementing these strategies, companies can not only increase their market share but also strengthen their positions in a competitive environment.