- Market share (also called revenue market share or market share by revenue) is the portion of a given industry that is owned or controlled by a single brand or entity.
- Learn how to calculate market share in different ways so you know where you’re winning, and where you need to establish a beachhead.
- Use your market share calculations to identify where you’re weakest and devise a strategy to dominate every channel.
If you want a perfect example of why you need to know how to calculate market share, look no further than TESLA.
In 2020, TESLA owned an impressive 18 percent of the global electric vehicle (EVs) market share. This is a huge success when you consider just how many car retailers have added EVs to their fleets.
TESLA couldn’t have become the household name they are today without the help of a team of brilliant decision-makers. After they calculated TESLA’s market share within the global EV market, they decided they could do things differently and take on long-standing competitors in the auto industry.
They created a unique business model that allowed them to retain total control of the sales and all service aspects of TESLA vehicles. By doing this, they created a product that appealed to consumers in thrilling new ways.
Had they not done a deep market share analysis, they might have missed the opportunity to truly own the market.
By learning how to calculate market share in different ways, you’ll gain strategic advantages over your competitors. When you view market share as more than a single number, you can take a more granular approach at measuring business growth (and risk) across multiple battlefields.
What is market share?
Market share is the portion of a given industry that is owned or controlled by a single brand or entity. Market share refers to a calculation that shows, in percentages, the revenue generated by a single company, as compared to the revenue earned by the entire industry.
This is the most standard definition of market share. But, this isn’t the only way to look at it. In fact, if you only view it through that lens, you could miss valuable opportunities.
There are a few different ways to calculate market share that can help you increase conversions, lower overhead, and maximize your advertising spend.
Market share by units sold
If you own a business that sells products en-mass, you’ll need to know how to calculate market share by the total number of units you sold in a given period of time when compared to the entire market size of units sold. This is the same calculation as market share by revenue — you just swap out dollars for products! I’ll explain how to figure out market share of this type later, and why it’s a useful number to have.
Market share by organic search traffic
If you generate leads or sales through your website, you should also know how to determine market share by organic search traffic. This is the ratio between the clicks you get out of the total available clicks for a defined set of keywords. It’s a great figure to have on hand when deciding how much money you need to spend on paid advertising and the SEO and content strategies for your business.
This is often the most overlooked market share calculation, much to the detriment of businesses across virtually every industry. The majority (53%) of shoppers do thorough online research before they make a purchase. So, it’s vital that you show up throughout the conversion funnel while they’re narrowing down their options.
Why you need to know how to calculate market share
No matter what industry you’re in, you need to learn how to find market share data to compare your business against competitors. Virtually every type of market that provides goods or services to consumers is saturated with brands competing for a limited pool of customer dollars.
Calculating your market share adds a layer of transparency to your business model. It allows you to approach your successes and your failures with deep clarity and the confidence to build on what’s working and reimagine what’s not working.
Compare your company with competitor performance
There are several rulers you can use to compare your performance with competitors.
If you’re a publicly traded company in the U.S., look at the United States Securities and Exchange Commission’s tool, EDGAR. EDGAR allows anyone to search the Securities and Exchange Commission’s database. This will give you deep insights into your competition.
How your competitors perform in Google is another indicator to monitor.
Who owns the largest market share of Google’s organic search results in your industry? Do your competitors rank well for highly valuable keywords? How do you perform for product vs informational queries? Are you present throughout the funnel, including TOFU, MOFU, and BOFU searches?
Understand current market penetration/saturation
Market penetration is a measure of how successful a brand is in its given industry. Popular brands will saturate the market with their presence, making it difficult for other brands to break in and compete for customer attention and, ultimately, revenue.
You can measure market penetration with a simple market share formula. You’ll need to compare your sales volume for the year against the total target sales for your industry in that year. Brands use this formula to determine pricing and marketing budgets, as well as how they will promote their products to customers.
If you understand your current market penetration, then you can more effectively assess new growth marketing opportunities. As a result, you’ll box out the competition and cement your position as the market leader.
Discover new market opportunities
You will often see “market penetration” as a quadrant on the Product-Market Growth Matrix, or the Ansoff Matrix. The Ansoff Matrix is a grid tool used in brand strategic planning. It’s a great asset to have when trying to assess what new market opportunities will work, and which opportunities can be passed on to better suit the overall strategic vision of your brand.
The Ansoff Matrix provides businesses with a step-by-step strategic growth process to follow. It doesn’t eliminate the risk of taking on new ventures. However, it helps mitigate risk by thoroughly evaluating every proposed business pivot or opportunity. It can also lay the foundation to generate new business opportunities.
Here’s a quick review of the quadrants:
- Market penetration — boosting sales of your existing products in the market that you currently occupy
- Product development — the ideation and creation of new products or services
- Market development — Plans and strategies on how to enter new markets with the products or services you currently have
- Diversification — breaking into new markets with new products or services
So, it’s clear that while understanding market penetration is one step in growing a successful business, it’s part of a larger puzzle. Brands that win approach this puzzle holistically and look for opportunities that competitors will miss or disregard. Knowing where you stand in terms of market share is the first step of the process.
How to calculate market share
It’s actually quite simple to learn how to calculate market share. Outlined below are the types of market share formulas we touched on earlier.
You might need some sales analytics on your total revenue for last year (or any recent fiscal year or fiscal quarter) as well as metrics on sales for the entire market to figure out your company’s market share. But, it’s really simple once you have the data you need. Just plug those numbers into Excel and you will have a treasure-trove of data to analyze.
How to calculate market share by revenue
- Select your fiscal period
- Calculate your company’s total sales
- Calculate the total market sales for your industry
- Divide your company’s total sales by your industry’s overall market sales
Steps to measure market share by units sold
- Select your fiscal period
- Calculate your company’s total unit sales
- Calculate the total units sold for your industry
- Divide your company’s total units sold by your industry’s total units sold
How to find market share by organic search traffic
- Select your fiscal period
- Calculate the total available clicks within a defined set of keywords based on total search volume and click-through rate
- Calculate your share of those clicks based on the CTR of your ranking position and the search volume for each term
What does an organic search market share report look like? Here are two examples that Terakeet recently published on the beauty and cosmetics industry as well as the financial services industry. Download these reports below.
How to increase your market share
Now that you know how to look at your brand’s share of the market through a number of lenses and calculations, you can use this information to increase your company’s market share, and ultimately, your company’s total revenue.
Below are a few things you can do to improve your brand’s overall competitiveness. By expanding what you offer, how you offer it, and where you offer it, you can begin to take the lion’s share of your market.
Grow organic search market share through SEO
In terms of marketing ROI, organic search is the most powerful customer acquisition channel you can leverage. According to Google, it drives 5x greater results compared to PPC.
Why is SEO so effective at driving organic growth and increasing market share?
Because consumer shopping behavior has changed. For years, customers have been warming up to online or hybrid buying experiences. However, the pandemic accelerated the trend, pushing consumers deeper into the digital shopping ecosystem.
Potential customers don’t just buy online; they research, compare, ask questions, and make decisions based on what they discover.
For example, the online publication Byrdie managed to capture a significant portion of organic search market share from massive beauty brands by creating informational content. When Terakeet calculated their market share within 9 sectors of the beauty industry, they were near the top of the leaderboard.
As a marketing executive, you must recognize that shift in consumer behavior and increase your investments in comprehensive, engaging, authoritative, search-optimized content. Doing so will capture more customers throughout the funnel and expand your organic market share.
If you’re new to SEO, read our article: What is Search Engine Optimization (SEO) – The Executive’s Guide.
Develop new products or services
If you really want to launch your business into the public consciousness, then develop new products or new services.
Look at Coca Cola, for example, a legacy brand that decided to think differently about the soft drinks industry. As other competitors entered the market, Coca Cola knew they could offer their flagship product in different flavors, so they did!
Developing new products always comes with a certain amount of risk. Especially when it comes to food and beverages. Consumers are often creatures of habit. So, Coca Cola had to do a tremendous amount of market research and brand awareness campaigns to get people on board. The rest, of course, is history.
There are nearly 57 billion drinks served each day, and nearly 2 billion are drinks owned or licensed by Coca Cola. Now that’s market saturation!
Mergers and Acquisitions
Another way Coca Cola discovered that they could increase market share was by diversifying their portfolio of products to include other types of drinks like Vitaminwater. Vitaminwater, as a sole entity, was initially doing 350 million in annual sales on its own. When Coca Cola purchased the company, that annual revenue grew to 1 billion dollars in sales.
Acquiring other companies removes some of the grunt work of establishing a new business. You get a built-in customer base and many of the starting operational costs are already taken care of. That said, it can be a major investment to acquire other companies, especially when they are already profitable. But, in the case of Coca Cola and so many others (like Nestle and major media corporations)
Imagine new ways of doing business
Not only does Coca-Cola know how to increase market share through acquisitions, they’ve even done so by transforming their company.
Coca-Cola was created by pharmacist Dr. John Stith Pemberton in Atlanta in 1886. It was originally created to be a tonic. Back then, it included wine and cocaine to “treat” a number of alignments.
Not long after Pemberton created the beverage, prohibition passed in his state. So, Coca-Cola was almost quashed before it even began. But, Pemberton was a true entrepreneur. He removed the wine and replaced it with syrup, making the earliest iterations of the Coca-Cola most of us are familiar with.
Imaging new ways of doing business has always been at the heart of Coca-Cola’s story, and it has been an unbelievably successful story. That’s what makes them the drink market leader.
So, maybe your brand needs its own Coca-Cola story. You could create an incredible digital customer experience on your website. Or, perhaps you invest in a new digital transformation initiative that’s been on the burner for several years.
Improve customer retention
When you improve customer retention, you lower the costs of doing business. Elastic Path says it can cost five times more to acquire a new customer than to keep current customers. That type of fiscal drain adds up over time. When you reduce your customer acquisition costs (CAC), you increase profit margins and you free up room in your budget to put into growing your business in other ways, like the ones outlined above.
Acquiring new customers costs 5x more than keeping current customersElastic Path
Existing customers are 50% more likely to buy a new product or serviceElastic Path
Increasing customer retention by 5% increases profits 25-95%Elastic Path
Increasing customer retention increases profitability by a significant margin, so it’s essential that you prioritize customer relationships.
Expand your customer base
When you expand your customer base to include new demographics, you unlock greater business potential.
In some cases, this may require nothing more than a shift in marketing messaging. Or, you might need to introduce a modified product or service with different features. In other cases, you may need to expand your customer acquisition efforts across different channels, bridging the gap between online and offline brand interactions.
Use market share calculations to build better strategies
It’s vital to know how to calculate market share to gather insights such as your company’s sales revenue compared to the industry’s total sales, or whether a specific competitor has a large market share in Google search. You must have access to these data points in order to build more effective strategies.
For example, you could have the highest total revenue because your products are more expensive. On the other hand, you might sell the most products, but at lower prices, shrinking your revenue numbers. Or, you may have the highest revenue and the most product sales, but you overspend on paid ads and affiliate marketing which reduce your profit margins. You may even have a high market share in one specific market, but almost no penetration overall within the industry.
If you analyze any one of these metrics in a vacuum, you might conclude that you’re the market leader. However, at closer examination, you’d realize that you’re behind.
Ultimately, it’s important to consider all the variables when calculating market share so your business remains profitable and competitive.