Understanding Market Share: Definition and Significance

Tati Khumairoh

Tati Khumairoh

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Illustration of how important market share is

Table Of Contents

    Marketing strategies often target an increase in market share. That shows how important it is for businesses' sustainability. But, do you understand fully about its importance? If you come across this post, we assume that you don’t. 

    Through this article, you will understand what is market share, the formula, its importance, and how you can monitor it to keep it as big as possible. Find out in the following article.

    What Is Market Share?

    Market share refers to the portion of total sales in a particular industry that a company or brand has captured. It is a measure of the company's market dominance and competitive position. 

    The higher the market share, the more significant the company's presence in the market. A company with a high market share is usually considered a market leader, while a company with a low market share may be considered a challenger or niche player

    Market Share Formula

    The formula for calculating market share is quite complex. It is the percentage of total sales in a particular industry that a company or brand has captured. Here is the formula:

    Market Share = (Company's Sales / Total Industry Sales) x 100%

    Picture 1: Illustration on how to calculate market share

    Picture 1: Illustration on how to calculate market share

    For example, let's say that ABC Company generated $10 million in sales in the fashion industry, which had a total industry sales of $100 million. Using the formula above, we can calculate the company's market share as:

    Market Share = ($10 million / $100 million) x 100% = 10%

    This means that ABC Company has a market share of 10% in the fashion industry.

    Importance of Market Share

    Now, you understand what it is and how to calculate it. let's explore the importance of market share and how it can benefit your business.

    Competitive Advantage Over Competitors

    One of the most significant benefits of having a high market share is the competitive advantage it provides. A company with a high market share is usually considered a market leader and has a more significant presence in the market. 

    It can leverage this position to negotiate better pricing, access to distribution channels, and other strategic partnerships. Having a competitive advantage over competitors can help businesses grow and expand their market share further. That is the first important of market share

    Increased Revenue and Sales

    The next important of market share is revenue and sales. As a company's market share increases, so does its customer base. A larger customer base means more potential sales, as there are more people interested in the company's products or services. 

    With a larger customer base, a company can reach a wider audience and tap into new markets.

    Not only that, but a higher market share often has more pricing power. They can charge higher prices for their products or services without losing customers because they have a strong brand and a loyal customer base. Higher prices mean higher revenue and profits, leading to increased sales. 

    Better Insights into Consumer Behavior and Preferences

    Since companies with great market share have more customers, they have more data to work with. By analyzing this data, companies can gain valuable insights into consumer behavior, including what products or services are popular, what features are most in demand, and what price points are most effective. 

    Not to mention, they can use their insights into consumer behavior and preferences to create targeted marketing campaigns. By understanding what motivates their target audience, they can create messages that resonate with their customers and lead to increased sales and revenue.

    Increased Visibility and Brand Awareness

    The last importance of market share is visibility and awareness. The higher the market share, the more exposure a business has. This means they are more visible to potential customers and have more opportunities to promote their brand.

    As a company's market share grows, so does its brand recognition. This is because customers become more familiar with the company and its products or services. This increased brand recognition

    Companies with a higher market share also tend to receive more media coverage. This can include news stories, press releases, and other forms of public relations. By leveraging this media coverage, companies can increase their visibility and promote their brand.

    It also often get benefit from positive word of mouth. This is because more customers are using their products or services and are more likely to recommend them to others. Positive word of mouth can lead to increased visibility and brand awareness.

    How to Monitor Market Share

    Monitoring and measuring market share is crucial for businesses as it allows them to gain valuable insights into their position in the market. By tracking market share, businesses can understand how they are performing in relation to their competitors and identify areas for improvement.

    The Metric

    One of the most commonly used metrics is market share percentage, which is calculated by dividing a company's sales by the total sales of all companies in the market. This metric provides a snapshot of a company's position in the market and allows for easy comparison to competitors.

    The Tool

    Since calculating market share is not easy to be done regularly and manually, you need one SEO tool that can do it for you. Use Sequence Stats to monitor the market share of your brand and competitors. 

    This tool has an exact feature called Domain Watchlist where you can compare the market share on your market. That way, you don’t need to calculate it manually, and the data will be available every time you need to see it. Here you can see the changes in market share day by day. 

    Picture 2: The detail page of the market share in Domain Watchlist

    Picture 2: The detail page of the market share in Domain Watchlist

    The user can also access the data of market share through View Insight in the rank dashboard. This market share data shows the top competitors based on the keywords users track. 

    Picture 3: View Insight in Sequence Stats. 

    Picture 3: View Insight in Sequence Stats. 

    Thus, you are not only tracking website performance such as ranking, but you can do competitive analysis thoroughly in one SEO tool. 

    Wrap Up

    In conclusion, market share is important to every business, as it provides valuable insights into a company's position in the market and helps identify opportunities for growth. By monitoring and measuring market share using the right SEO tool, one can gain a better understanding of their position. 

    Since it is essential to monitor market share regularly, you can take advantage of Sequence Stats in tracking your position against competitors. Now, you can explore all features with a free trial by registering your account.