how to make market share in business plan

What is Market Share: Definition, Formulas, and Examples

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Market Share represents the success of a business in cold hard numbers.

Knowing what it is and how to measure it can help a business benchmark performance, track success, and make plans to grow.

What is market share?

Market share is a company’s percentage of the overall sales in a given industry or market.

Why is market share important?

Market share is the ultimate measure of a company’s success within its market. It’s calculated using sales revenue, not profit. Knowing how you stack up against rivals is a solid indicator that can be used for competitive benchmarking , identifying industry leaders , strategic planning, and much more.

Why do you need to grow your market share?

Market share is usually assessed over a fiscal year or quarter.  Monitoring it helps evaluate your company’s growth by examining how you progress relative to the overall market growth. A thriving company will see its market share increase  faster than that of the competition.

Any tiny shift in the market distribution in stable markets can disrupt well-balanced market forces. In growth markets, changes are expected and, therefore, less significant.  With new products or technology, a vendor could bite off a competitor’s share or attract a new target audience that wasn’t previously part of the equation.

However dynamic your market, increasing your industry share is vital for growth. Capturing a larger percentage of the market means you are increasing sales and revenue.

How do you calculate market share?

There are many ways to establish market share, and finding the right method for your business is important. It can be gained or taken quickly, so companies must use Digital Intelligence tools like Similarweb to keep track of key market share metrics in real time. Simply using revenue figures alone is no longer enough to keep up with the speed of change that most markets are experiencing .

Market share formula by revenue

Take your total annual revenue figure, divide it by the total overall revenue for your market, and then multiply it by 100 to get the percentage. For example, if your annual revenue is $1M, and the total revenue for your market is $100M, then you have a 1% share of the market.

Relative market share formula

You may want to compare your business to a specific competitor or industry leader. In this case, you can calculate the relative market share. Divide your market share by that of the relevant rival.

Read more in our full guide to market share formulas – Expand Your Reach: 4 Market Share Formulas to Get You There

Analyzing your market share

The company with the largest market share is usually considered the industry leader. But market share is no key indicator of a company’s financial health, profitability, or growth.  It measures your competitiveness and gives you a general idea of how you match up in your target arena.

What does market share mean for your position in the competitive environment? It shows how the pie is sliced and how big a piece you have relative to everyone else. When you segment your target market , you receive a more granulated view. Picture each segment as a whole pie and compare how the distribution of portions varies.

Digital companies often use traffic share to gauge their control of the online “pie.” This is particularly valuable if you are running a non-ecommerce site and can’t measure your percentage based on revenue. Measure your traffic share and segment it as you would the market. Take a look at the example in the following section to see how it’s done.

Understanding your market share

Market share is also relative to your business. A global market share of 1% is nothing to brag about for a company that sells to the worldwide market. But if you only target Texas, it’s an impressive number, and you might even be leading the local market.

As a local vendor, you should consider  benchmarking  against comparable businesses in other regions. Choose similar size companies with equivalent  audience demographics . This lets you evaluate if your market share is average for your type of company or exceptionally high or low.

To gauge market share correctly, look at your target audience segment . Your company may focus primarily on women, millennials , or high-income customers, which means your goal is leadership in a particular market segment. You’ll conquer the rest later with a new strategy.

The bottom line; when you try to gain insights from market share, make sure to view it in the proper context.

Market share example

Another way to calculate market share is to use website traffic as your key performance indicator . This way, you get a benchmark you can track in real-time, and while it’s not revenue-based, it shows how much interest and activity takes place in a market and allows you to track known industry leaders and your own site efficiently and easily.

Here’s a faster, more modern approach to measuring your share of the market. In this example, I’m using the accommodation and hotel market to demonstrate how to quickly analyze market share.

In 30 seconds, I can see who the industry leaders are and by what percent their business has grown or declined in a given period. I also see rising players; this is interesting, as these companies show notable growth in my market . So, while they have a relatively low share right now, they are emerging names with the ability to disrupt a market fast. At the bottom of the market leaders page, I can see a list of market leaders, sorted by share of traffic, with other useful traffic and engagement metrics to track, along with a yearly change %. This covers the top 10k domains in a sector, so it’s extensive and comprehensive.

You’ll have noticed a market quadrant analysis too. A quick click downloads a nice visual representation of the market leaders; which you can filter and sort according to the market share metrics that matter to you most. In this example, I chose unique visitors and traffic share.

5 ways to increase market share

• Marketing and branding With more aggressive advertising, you can expand your reach, gain more users, and increase customer loyalty. For long-term effectiveness, a strong branding strategy is essential.
• Price reduction You can tackle the issue from another angle by lowering your pricing just enough to beat the competition. This is the idea behind periodic discount campaigns, in which companies manage to steal competitors’ customers before raising prices again.
• Retention Nurturing your existing customer base is an underutilized and highly effective method. You keep your customers close when you maintain a positive relationship and send an occasional special offer.
• Innovation The best example of this strategy is Apple. The company constantly and regularly offers new product lines and innovative features for its existing products. Customers keep coming back for more.
• Acquisition If you can’t beat them, buy them. One way that helps Facebook to expand is by acquiring smaller companies and taking over their market share. Instead of winning over new customers, they take over the company.

Drawing conclusions from market analysis

Let’s look at an example of a non-ecommerce digital competitive set and the insights we gain from looking at market share.

Take the news site cnn.com. To define the target market , we look at the overall traffic to publishers and media sites . Specifically in the U.S., CNN’s traffic share is roughly 12%, putting them in second place right after Yahoo, also the global leader.

On the other hand, the news channel ranks number 85 globally. Does this mean CNN isn’t a significant news channel? Not necessarily. We can learn two things: Americans are the largest segment of news consumers, and CNN successfully targets American readers. We can also analyze traffic segments, such as specific marketing channels or devices, to learn more.

The next step

Similarweb Digital Research Intelligence is THE go-to platform for accurate traffic trend data. Compared to other market analysis tools , it provides the freshest insights, packaged in an intuitive platform that highlights the important changes and market share metrics you need to track.

Why Similarweb

• Data you can depend on
• Dynamically updates to give daily insights
• Easy-to-use platform, filled with useful market intelligence
• Highly accurate market trends data
• Try it for free and find out where your market stands.

How can I measure market share growth?

Calculate market growth by subtracting the market size for year one from the market size for year two. Divide the result by the market size for year one and multiply by 100 to convert it to a percentage.

What is the market share formula?

Divide your business revenue (traffic) by the total industry revenue (traffic). The result is your market share.

What is the quickest way to calculate market share?

Use a digital intelligence platform to capture real-time market share data. Outdated methods that rely on revenue alone fail to give you a current view of industry leaders.

How can you increase your market share?

Increase market share by using marketing and branding, price reduction, retention, innovation, and acquisition.

by Liz March

Digital Research Specialist

Liz March has 15 years of experience in content creation. She enjoys the outdoors, F1, and reading, and is pursuing a BSc in Environmental Science.

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What Is Market Share & How Do You Calculate It?

Updated: December 07, 2022

Published: January 16, 2020

In the marketing industry, you've likely heard the term "market share" from time to time, but what does it mean? Why is it necessary, and how is it calculated?

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. In this post, we’ll outline what market share is, how to calculate it, give real-life examples, and explain how you can increase yours.

What is market share?

Market share formula, relative market share, relative market share formula, market share examples.

How to Expand Your Market Share

Understand Your Market Share to Increase Business Success

Market share is the percentage of an industry's sales that a particular company owns. Essentially, it is the share of your business's total industry revenue from selling your products and services. Businesses with larger market shares are industry leaders and competition for smaller companies.

Suppose consumers buy 100 T-shirts, and 70 are from Company A, 25 from Company B, and 5 from Company C. In that case, Company A owns a market share of 70% and is the leading industry competitor .

Market share is typically calculated for a specific period, like yearly or quarterly sales, and is sometimes separated by region.

How to Calculate Market Share

Find your business’s total sales revenue for your preferred period and divide that number by your industry’s total revenue during the same period. Once you have this result, multiply the number by 100 to generate your market share percentage.

Calculating your market share will give you an overall understanding of your position in the industry, but it’s also helpful to understand how you measure up to your direct competitors. By understanding the basics of the stock market , you can easily understand how each company and their share make up the entire industry.

Free Market Share Calculator

Five calculators to help you quickly and easily calculate your market size

• Total Addressable Market (TAM)
• Serviceable Addressable Market (SAM)
• Market Size & Share
• Market Penetration Rate

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Relative market share compares your performance to industry leaders.

Rather than using total industry revenue, you’re dividing your market share by your top competitor's market share, multiplying the result by 100. The result will show you the portion of the market you own in relation to your most significant competitor. The image below shows the relative market share formula.

It may be easier to understand market share with real-life examples, so we’ll go over some below for businesses you may already be familiar with.

Nike Market Share

Nike is part of the athletic footwear and apparel industry, selling various sports equipment, casual shoes, and accessories.

Nike’s global market share in sportswear is estimated to be 43.7% . The brand is an industry competitor for Adidas and Under Armour.

Tesla Market Share

Tesla is part of the automotive industry and produces electric vehicles (EVs). Within the U.S. EV industry, Tesla holds an over 70% market share.

It's essential to recognize that the market for EVs worldwide is significantly smaller than standard vehicles. EV’s market share in the automobile industry is 2.8%, and Tesla’s is .8% . These differences are significant, so it is vital to analyze relative market share to compare your business to your direct competitors rather than just the market as a whole.

Spotify is a music-streaming platform and has the highest music-streaming market share with 31% of the market.

The second-highest market share belongs to Apple Music (15%), followed by Amazon Music (13), Tencent (13%), and YouTube (8%).

E-commerce company Amazon has a U.S. e-commerce market share of 37.8% and is the leading online retailer in the country. Second place belongs to Walmart with 6.3%, and third place goes to Apple with 3.9%.

Most recent statistics show Target is the largest department store retailer in the U.S. with a 38% market share. Walmart and Macy's both rank second with 13%.

Chew is an online pet product and food retailer with a market share of 40% in the U.S. The company plans to expand into the global market in 2024 and is expected to gain a 20% market share outside of the U.S. by 2030.

Google Market Share

Google has a market share of 92.37% , making it the most popular search engine in the world. It dominates the competition, as the second-largest industry leader is Bing with a market share of just 3.57%.

Once you’ve calculated your market share and understand how you relate to your industry competitors, you can begin strategizing how to increase your overall revenue.

How To Expand Your Market Share

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 that the cheap option isn't right for every brand. You want to ensure that you’re pricing products appropriately to provide value to customers but not lose out on revenue opportunities to beat the competition.

2. Innovate new products and features.

Companies innovating and bringing new technology to the table often see their market share increase.

New products and features attract new customers, also known as acquisition , which is a driving factor for generating revenue. New customers make new purchases and, in turn, contribute to higher profit margins and larger contributions to overall industry revenue. More significant contributions directly translate to increased market share.

3. Delight your customers.

One of the best ways to grow your market share is to work on existing customer relationships.

You can inspire customer loyalty by delighting current customers by providing exceptional experiences and customer loyalty. Loyal customers are more likely to make repeat purchases, which increases your business revenue and contribution to total industry revenue. As mentioned above, higher revenue contributions equal a higher market share percentage.

4. Increase brand awareness.

Branding awareness and national marketing play a significant role in capturing market share. Getting your name out there is important, 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.

Why is market share important?

Calculating market share lets companies know how competitive they are in their industry. Additionally, the more market share a company has, the more innovative, appealing, and marketable they are.

Market share is more important in industries that are based on discretionary income. Market share doesn't always have a significant impact in constantly growing industries. However, it's important to remember that a company can have too much market share — also known as a monopoly.

For example, with growing industries with a growing market share, companies can still increase their sales even if they lose market share.

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

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

Lower market shares can let you know that you need to focus on customer acquisition, marketing to raise brand awareness, and overall strategies to increase revenue. Higher percentages indicate that your current plan is adequate and that you should focus on customer retention and product innovation.

Whether your company is well-established or just starting, it’s important to understand your industry standing as it will help you meet business objectives and achieve desired success.

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