What is relative market share?
Relative market share is a marketing metric used to compare the firm’s market share to the largest competitor in the market. When calculating relative market share, the market leader’s market share is used as the benchmark.
The formula for relative market share is:
% Market share of the firm’s brand/% market share of their largest competitive brand in the market
Example for calculating relative market share
Let’s assume that there are just five brands in the marketplace and their unit market shares are shown below.
As Brand A is the market leader, it is used as the benchmark to calculate the relative market share metric for ALL other brands – in other words it sits at the bottom (denominator) of the formula calculation.
The exception is when calculating relative market share for the market leader itself (Brand A in our example), which is compared to their largest competitor. This is demonstrated in the table:
The calculation of relative market shares for each of the brands is as follows:
- Brand A = 40%/30% = 1.33
- Brand B = 30%/40% = 0.75
- Brand C = 20%/40% = 0.50
- Brand D = 6%/40% = 0.15
- Brand E = 4%/40% = 0.10
Important Notes on the Relative Market Share Calculation
- As you can see, all brands are compared against the market share of the market leader – except for the market leader itself, which is compared against their largest competitor (the 2nd ranked brand in the market = Brand B in this example).
- And there can only ever be one brand/firm that has a relative market share greater than one. This will be the market leader only. All other brands (or firms) will have a relative market share of less than one. And many small brands will have a very low relative market share figure.
Using relative market share in the BCG matrix
Use unit market share or dollar market share to calculate relative market share?