How to Calculate Market Share (With Formulas and Examples)

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There are several benchmarks that brands can use to assess the health of their business. It’s important to know where your business stands in terms of market competitors. 

Enter market share. While this metric is typically used for financials, market share can also be used to determine your business’ digital reach. Owning the market share of consumer attention in your industry helps you gain an edge over your competitors.

In this article, we’ll break down how to calculate market share and provide market share examples.

What is market share?

MARKETING
TERM
DEFINITION

Market Share

Market share is the portion of a given industry that is owned or controlled by a single brand or entity within a time frame. 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.

A low market share tells you that your business holds a smaller share of the market, while a high market share highlights that your business holds a larger share of the market. This percentage is also referred to as absolute market share or revenue market share.

Relative market share

While absolute market share paints a picture of how your business is doing compared to the entire market, the relative market share shows where your company stands in comparison to a particular company, typically the leading competitor in the market. 

Depending on the industry, relative market share can reveal where your business stands in comparison to a specific industry leader. 

Market share by units sold

If you own a business that sells products en masse, you’ll need to know how to calculate market share by the total number of units 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. 

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 content strategies for your business.

Organic search traffic 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 market share calculations matter, an example

Tesla provides the perfect example of why you need to know how to calculate market share.

In 2023, Tesla owned an impressive 21.7 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 it is today without the help of a team of brilliant decision-makers. After they calculated Tesla’s market share within the global EV market, the company decided it could do things differently and take on long-standing competitors in the auto industry.

Tesla created a unique business model that allowed it to retain total control of the sales and all service aspects of Tesla vehicles. By doing this, it made a product that appealed to consumers in thrilling new ways.

Had Tesla not done a deep market share analysis, the company 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 to measuring business growth (and risk) across multiple fronts.

Why you need to know how to calculate market share 

Almost every consumer market is saturated with brands competing for a limited pool of customer dollars. Brands need to fully understand multiple types of market share to know their position and that of the competition.

Calculating your market share adds transparency to your business model, provides clarity on successes and failures, and lets you iterate on inefficiencies.

1. Compares your brand 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, Electronic Data Gathering, Analysis, and Retrieval system (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?

2. Reveals your brand’s 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.

3. Pinpoints new market opportunities for your brand

Market penetration is a quadrant on the Product-Market Growth Matrix, or the Ansoff Matrix. This grid tool used in brand strategic planning helps organizations assess new market opportunity feasibility to determine which opportunities best suit the overall strategic vision of a brand.

The Ansoff Matrix provides businesses with a step-by-step strategic growth process to follow and 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 Ansoff Matrix 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

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 regarding market share is the first step of the process.

How to calculate market share

Outlined below are the types of market share formulas you need to understand.

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 the industry’s total revenue to figure out your company’s market share. Just plug those numbers into Excel and you will have a treasure trove of data to analyze.

How to calculate market share by revenue

1. Select your fiscal period
2. Calculate your company’s total sales
3. Calculate the total market sales for your industry
4. Divide your company’s total sales by your industry’s overall market sales
5. Multiply the sum by 100 to get the percentage

How to calculate relative market share

1. Select your fiscal period
2. Calculate your company’s absolute market share
3. Calculate your competitor’s absolute market share
4. Divide your company’s market share by your competitor’s market share
5. Multiply the sum by 100 to get the percentage

How to calculate market share by units sold

1. Select your fiscal period
2. Calculate your company’s total unit sales
3. Calculate the total units sold for your industry
4. Divide your company’s total units sold by your industry’s total units sold
5. Multiply the sum by 100 to get the percentage

How to calculate market share by organic search traffic

1. Select your fiscal period
2. Calculate the total available clicks within a defined set of keywords based on total search volume and click-through rate (CTR)
3. Calculate your share of those clicks based on the CTR of your ranking position and the search volume for each term
4. Divide your share of clicks by the total number of clicks in the term
5. Multiply the sum by 100

Examples of organic search market share reports

Here are two real world organic search market share report 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

With the knowledge to calculate and assess your brand’s share of the market through several lenses, it’s time to learn how to improve your brand’s overall competitiveness, and ultimately, your company’s total revenue.

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

In terms of marketing return on investment (ROI), organic search is the most powerful customer acquisition channel you can leverage. According to Google, it drives 5x greater results compared to pay-per-click (PPC).

This is 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.

An 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 its market share within 9 sectors of the beauty industry, they were near the top of the leaderboard.

Shifting your investment 

As a marketing executive, you must recognize that shift in consumer behavior and increase your investments in comprehensive, engaging, authoritative, search-optimized content. This content, delivered through a network of owned brand assets, captures customers across the buyer’s journey and builds priceless trust with your audience. 

Brands that foster trust and authentic connections with consumers gain market share with each new connection, capitalizing on earned brand loyalty and, ultimately, achieving market leadership.

If that aligns with your goals, we recommend learning about owned asset optimization (OAO). See our OAO foundational guide.

Develop new products or services

If you 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 it could offer its flagship product in different flavors, so the brand did it.

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 it could increase market share was by diversifying its portfolio of products to include other types of drinks such as Vitaminwater. As a sole entity, Vitaminwater 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, the company has transformed over the years. 

Coca-Cola was created by pharmacist Dr. John Stith Pemberton in Atlanta in 1886. It was created to be a tonic. Back then, it included wine and cocaine to “treat” several 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.

Increasing customer loyalty and retention increases profitability by a significant margin, so you must 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 significant market share in Google search. You must have access to these data points 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 reduces 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.

Takeaways on organic market share

Knowing your market share and implementing a combination of market share growth strategies is a key way to gain an edge over your business’ competitors and lead to market share increases. Especially in areas where your competitors may not be thinking of such as organic growth.

Knowing where you stand is the first step to tackling the bigger goal of market share dominance. Keep in mind that there are many forms of market share to pursue, and one that’s often overlooked but incredibly important is organic market share. Attention is everything in today’s digital spaces.