Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a 10percent share in that market.
"Marketers need to be able to translate sales targets into market share because this will demonstrate whether forecasts are to be attained by growing with the market or by capturing share from competitors. The latter will almost always be more difficult to achieve. Market share is closely monitored for signs of change in the competitive landscape, and it frequently drives strategic or tactical action."Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. . The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project . Additionally, market share is a key metric in understanding performance relative to the growth of the market as measurement of internal sales growth (or decline) only may be a result of similar growth or declines in the industry being measured.
Increasing market share is one of the most important objectives of business. The main advantage of using market share as a measure of business performance is that it is less dependent upon macro environmental variables such as the state of the economy or changes in tax policy.
In the United States market, however, increasing market share may be dangerous for makers of fungibility and potentially hazardous products such as medicine, due to a US-only legal doctrine called market share liability.
It is generally necessary to commission market research (generally desk/secondary research) to determine. Sometimes, though, one can use primary research to estimate the total market size and a company's market share.
" Unit market share: The units sold by a particular company as a percentage of total market sales, measured in the same units."
"This formula, of course, can be rearranged to derive either unit sales or total market unit sales from the other two variables, as illustrated in the following:"
" Revenue market share: Revenue market share differs from unit market share in that it reflects the prices at which goods are sold. In fact, a relatively simple way to calculate relative price is to divide revenue market share by unit market share."
"As with the unit market share, this equation for revenue market share can be rearranged to calculate either sales revenue or total market sales revenue from the other two variables."
Market share can be decomposed into three components, namely penetration share, share of customer, and usage index. These three underlying metrics can then be used to help the brand identify market share growth opportunities.Fripp, Geoff, "Decomposing Market Share" The Marketing Study Guide
In a 2010 survey of nearly 200 senior marketing managers, 67% responded that they found the revenue or "dollar market share" metric very useful, while 61% found "unit market share" very useful.
It is generally accepted that no single source will provide a fully comprehensive market share, as most methods of calculation are incomplete. Methods such as POS aggregation may omit specific retailers or brands from the calculation, while methods such as collecting consumer data may rely on recall or collecting data from a representative sample. The best method of market share calculation depends on the industry and the methods available.
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