What Is Market Share & How Do You Calculate It?

Growing up, I used to play "grocery store" with my sister. We'd go into our pantry, take out all the food, and set up a grocery store in our living room. I would typically "buy" goldfish.

You might be thinking, "What does this have to do with market share?"

Well, let's say that I bought 10 bags of goldfish from various "companies" that my sister, mom, and dad owned. If three of those bags were my sister's goldfish, that would mean that she had a 30% market share of my goldfish.

Put simply, that is market share. But how does that impact marketers?

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.

Below, let's review market share – what it is, how it's calculated, and why it's important.

What is Market Share?

Market share is the percentage of an industry's sales that a particular company owns. In other words, it's a company's total sales in relation to the industry.

Typically, it's calculated over a period of time, dividing it into yearly or quarterly sales, and separated by national and regional levels.

Market share gives a company an idea of its revenue compared to the overall industry and its competitors.

Once you calculate your market share, you can begin strategizing how to increase your overall revenue.

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 being the "cheap" option isn't the right move for every brand.

2. Innovate new products and features.

Companies that are innovating and bringing new technology to the table, often increase their market share. Once those companies have brought on new customers, they can work on customer loyalty and build a relationship with their consumers.

3. Appeal to new demographics.

Your marketing team should market launch campaigns for new products and features you introduce. Additionally, the marketing team needs to figure out how to reach a larger portion of the market. That might mean running promotions, discounts, or sales to attract new customers.

4. Delight your customers.

One of the best ways to grow your market share is to work on your customer relationships, so you can retain current customers.

Interestingly, one of the top marketing strategies is to delight current customers, so you can attract new ones.

5. Branding awareness.

Branding awareness and national marketing play a large role in capturing market share. It's important to get your name out there 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.

For example, with growing industries — which have a growing available market share — companies can still increase their sales even if they are losing market share.

On the other hand, with discretionary income industries, such as travel or non-essential goods like entertainment and leisure, the economy can have a major impact on market share. Sales and margins can vary depending on the time of year, meaning competition is at all-time high.

The high competition often leads to risky strategies. For instance, companies might be willing to lose money temporarily in order to force competitors out of the industry and gain more of the market share. Once they have more market share, they can raise prices.

Like I mentioned above, though, it's possible to have too much market share. Government antitrust laws prevent businesses from getting too big.

Whether your company is just starting out or is well-established, it's important to understand market share and how it impacts your marketing tactics.