Market Shares: Overview and Formulas

 

Market share is a measure of how the brand/firm is performing relative to its competition.

The measurement of market share is a relatively common marketing metric. There are two main types of market share metrics, namely unit market share and revenue market share.

Unit market share

In marketing the word “unit” refers to individual product units. For example, if we are selling shoes then a unit is one pair of shoes. If we are selling candy bars then a unit is one candy bar, and so on.

Unit market share formula

market share formulaNumber of unit sales for the firm/brand divided by total number of unit sales for the market

Please note that market shares are measured on a percentage basis.

Revenue market share

In marketing the word “revenue” refers to sales revenue at the retail level. We are interested in identifying the share of the consumers’ total spend in the market.

Revenue market share formula

Total sales revenue for the firm/brand at the retailer level divided by the total sales revenue for all players in the market

Again revenue market share is measured as a percentage.

The purpose of market share metric

The main intention of the two market share metrics is to identify how well the firm/brand is performing relative to its competition. Ideally, brands look to grow their market share over time – as this represents a preference by consumers to purchase the product. Likewise a reduction in market share over time indicates that the brand is becoming less preferred relative to its competition.

Use unit or revenue market share?

In markets where the price points are relatively similar, then both metrics will return reasonably similar results in either market share measures will be suitable.

However, if a firm wants to dominate retail shelf space, reduce competition, utilize excess production, pursue economies of scale, is pursuing a discounting strategy, and so on – then unit market share would be more appropriate.

On the other hand, if the firm wants to charge a price premium, then a revenue market share figure would be more appropriate. Please see the article on unit versus revenue market share.

Related topics

Relative market share
Market concentration
Variations of market share
Free Excel template for market share
Examples for calculating market shares
The three components of market share

External Links

Defining the market
A Guide to Market Segmentation