What is Market Share? Market Share Metrics, Market Share Formula

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Market Share and Mind Share are closely related, but try to estimate relative strength in different ways.

Market Share focuses on shares of revenues generated as the total revenues for that market, by either looking at total sales vs competitors, sales or units shipped for particular products, or by looking at shares of usage at a consumer level.

Defining Your Market
How big is your market?

Use a Top-down or Bottom-up approach to define

How fast is your market growing?
Key market trends – technological, social, demographic, regulatory

Who are your competitors?
Both direct and indirect

How is your market segmented?
Product segmentsSize, price, features, technology, design, inputs, packaging, performance, new vs aftermarket, product vs services, bundled

Buyer type
Industrial and commerical – industry, strategy, sophistication, OEM vs user, vertical integration, size, ownership, financial strength

Consumer goods – demographics, lifestyle, language, DMU

Channel
Direct vs. distributors, direct mail vs retail or whoesale, brokers, types of distributors or retail, exclusive vs non-exclusive, government vs commercial vs service provuders, online vs offline etc

Geographic buyer location
Localities, regions, countries, weather zones, stage of development

Metrics: Market Share

The Question:

How strong is your position in the marketplace?

Approach:

Your companies sales as a percentage of the total market

Commentary:

It has been said that managers talk sales, directors talk ROI and boardrooms talk market share. A dominant market position can lead to a cashcow business – but beware new entrants who change the shape of a market, destroying old and creating new.

The Formula:

Market Share (%) = Company Revenues ($) / Total Addressable Market ($)
Unit Market Share (%) = Unit Sales (#) / Market Unit Sales (#)

Metrics: A Deeper Dive into Market Share
 
Penetration Share (%)
Penetration is the number of people who have bought your product, or the category of products you are measuring

Penetration Share (%) = Brand Penetration (%)/ Market Penetration (%)

Share of Wallet (%)
How much do our customers spend with us vs others in category

Share of Wallet (%) = Spend with Us ($)/ Total Category Spend ($)

Heavy Usage Index (I)
How heavily do my customers use my product?

Heavy Usage Index (I) = Avg Total Purchases in Category by Customers/ Avg Purchases in Category by All Market (# or $)

The Formula:

Market Share (%) = Penetration Share (%) * Share of Wallet (%) * Heavy Usage Index (I)

Metrics: Relative Market Share

The Question:

How strong are we compared to our nearest competitors?

Approach:

Our market share compared to our competitors share

Commentary:

A market share figure is meaningless unless we know how fragmented a market place and what share competitors have. This metric gives a relative figure, with anything above 100% telling us how much larger we are against #2 – or how smaller we are if under 100%

The Formula:

Relative Market Share (Index, $) = Our Market Share ($ or #)/ Largest Competitor’s Market Share ($ or #)

Sales & Marketing

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