What is market share?
Market share refers to the portion or percentage of a market’s total sales, revenue, or customer base that is controlled or captured by a particular company or product. It’s a key metric you can use to assess your company’s competitive position within an industry or market segment. In the world of indirect sales, partnerships also play a significant role in increasing this market share. Channel partners—like distributors, resellers, or referral partners—can extend your reach into new markets or deepen your presence in existing ones.
Market share is calculated based on the total size of the market or segment in terms of sales, revenue, units sold, or customers. This total represents the entire demand for a particular type of product or service within that market. To calculate market share, take your company’s own sales or revenue for a specific period (usually quarterly or annually) and divide it by the total market size. Multiply by 100 to get the percentage of your market share.
Market Share Percentage Calculation = (Company’s Sales or Revenue / Total Market Size) x 100
For example, suppose an HR tech company generated $5 million in annual revenue, while the total market size for HR technology solutions in their region amounted to $50 million. To calculate their market share, they’d divide their revenue by the total market size and multiply by 100, resulting in a market share of 10%.
Market share can help you gauge the success of your marketing, sales, channel, and other growth strategies over time. You can also use market share data to inform future decisions about product development, growing your partner network, pricing, and resource allocation.
A high market share can signal strength and stability to investors and stakeholders, potentially increasing confidence in your company. But it’s important to note that market share is just one metric among many that businesses use to assess their performance. A high market share doesn’t necessarily guarantee profitability or long-term success, as factors like profitability, customer loyalty, and market growth rates also play a crucial role in your company’s overall performance and competitiveness.