How to Calculate Market Share and Find New Growth Avenues

1 year ago 69
ARTICLE AD BOX

When the US tribunal dismissed 2 antitrust lawsuits against Facebook due to the fact that the attorneys failed to beryllium monopolistic status, the complications of calculating marketplace stock successful a integer discourse were connected afloat display. 

Though the stakes apt aren’t arsenic precocious for your business, knowing however to place your marketplace stock is inactive an important portion of the market research process. Whether you’re looking to interruption into caller markets, seizure a larger stock of your existent market, oregon support different companies from encroaching connected your share, knowing however overmuch of your marketplace you ain is key. 

With elephantine brands—think P&G, Coca-Cola, oregon Tesla—large analytics firms people yearly reports that way their marketplace stock shifts. But if you aren’t operating connected that scale, and particularly if you person an online business, determination are different ways to cipher marketplace stock without involving costly and often lagging third-party analytics.

This station volition locomotion you done each the essentials of marketplace stock appraisal and item immoderate of the apical marketplace stock maturation tactics.

In the accepted sense, marketplace stock is ever astir sales. So, if you Googled “market stock definition”, you’d get thing similar this:

“Market stock is the percent of full income successful an manufacture generated by a peculiar company.” — Investopedia

Essentially, if you’re operating successful a billion-dollar market, and your yearly gross is astatine $100,000,000, you person a 10% marketplace share.

In the online space, however, it’s not conscionable astir sales. In Facebook's lawsuit the main work they provide—social networking—is really free. The advertizing dollars they person are portion of a antithetic market. So, successful this case, the mode successful which marketplace stock is defined gets a spot much complicated. 

With online businesses, determination are aggregate ways to measurement marketplace share. You could measurement progressive users, traffic, and different criteria alternatively of conscionable considering sales.

Whatever criteria you use, it's important to retrieve that marketplace stock is ne'er a changeless number. It’s prone to change, truthful if anyone’s talking astir marketplace share, they thin to connote circumstantial clip periods—quarterly oregon yearly stats.

[Market Share Overview Video] 

There are a fewer fashionable ways to cipher marketplace share:

  • The classical marketplace share look is based connected the industry’s full sales
  • The lawsuit marketplace stock formula is customer-centric, truthful you person to cognize the full fig of customers wrong your market
  • The comparative marketplace stock formula is based connected the marketplace shares of your industry’s cardinal players
  • The marketplace stock maturation look relates to each 3 of the above, allowing you to spot however your marketplace stock has grown implicit clip

In the online realm, however, income and customers tin beryllium easy replaced by traffic, arsenic the erstwhile numbers tin beryllium hard to grasp unless you’re dealing with a marketplace afloat of nationalist companies.

Find your company’s full income for a preferred period, and disagreement that fig by the industry’s full gross during the aforesaid period; past multiply the fig by 100 to get a percent amount. 

img-semblog

For instance, let’s accidental you merchantability shoes and your full income for a 4th equaled $100,000. During that aforesaid clip period, full manufacture income were $1,000,000. Your marketplace stock would adjacent 10%. 

The nonstop look would look similar this:

$100,000 / $1,000,000 = 0.10 x 100 = 10% marketplace share.

This metric volition springiness you an wide knowing of your company’s presumption wrong the industry. However, effort to comparison yourself against nonstop competitors. Otherwise, this won’t beryllium a invaluable metric for you to track. 

In immoderate cases, you mightiness measurement marketplace stock by the fig of customers instead. This is usually the preferred method for much salient industries, which thin to person these figures readily available. 

In this case, you commercialized income for customers to get a akin percent amount.

img-semblog

Keeping our footwear institution example, accidental you person 50,000 customers during that aforesaid quarter. The concern is located successful an country wherever determination are 1,000,000 footwear customers during that aforesaid period. 

So, the look would look like: 50,000 / 1,000,000 = 0.05 x 100 = 5%

Another mode is to comparison your show to manufacture leaders. Here, you disagreement your marketplace stock by your apical manufacture competitor’s marketplace share. Then, multiply this effect by 100 to get a percent amount. 

img-semblog

Using the erstwhile example, let’s accidental the largest nonstop rival has a 45% marketplace share. 

Then, your comparative marketplace stock look would look similar this:

10% / 45% = 0.22 x 100 = 22% comparative marketplace share. 

The effect is your information of the marketplace successful narration to your largest competitor. This metric could service arsenic a much close practice of your business’s fiscal state. 

To way marketplace stock growth, you’ll request to comparison your marketplace stock numbers crossed antithetic points successful time. 

Let’s accidental successful April of 2021 our marketplace stock was 10%, and by April of 2022 it had grown to 25%. 

In this case, our marketplace stock has accrued by 15 percent points. 

img-semblog

To fig retired the maturation rate, we’d disagreement the summation by the archetypal marketplace stock and multiply by 100. This means past twelvemonth our institution marketplace stock grew by 150%. 

Your marketplace stock maturation calculation would look similar this: 

15% / 10% = 1.5 X 100 = 150% summation implicit time.

In the online realm, marketplace stock tin (and should) beryllium calculated based connected postulation numbers, and successful this case, you tin usage Semrush Market Explorer’s intel, which can: 

  • Assess the size of your marketplace and your site’s marketplace share, and comparison these numbers to assorted markets (you tin specify the geographical location)
  • Select the closest competitors based connected integrated postulation counts and target audiences 
  • Get estimates connected competitors’ marketplace stock to benchmark and measure your online performance. 

With the extremity of exploring the Market Explorer tool, let’s ideate Warby Parker, a NY-based eyewear marque that operates some online and offline, wanted to measure its online marketplace share. 

Here are the cardinal marketplace stock related insights they mightiness gather:

Entering Warby Parker into the Market Explorer instrumentality automatically generates the Overview Report, which reflects the cardinal aspects of the marketplace for a wide understanding. At the apical of the report, you’ll observe the Market Summary, which offers a fig of utile metrics. 

img-semblog

Online, Warby Parker’s marketplace stock successful the US successful January 2022 was astatine 14.26% — this stat is based connected the brand’s January postulation number successful narration to the wide marketplace traffic.

Looking astatine the Market Size section, we tin statesman to enactment retired marketplace maturation potential. To bash this, we request to recognize the Total Addressable Market (TAM) and the Serviceable Available marketplace (SAM). 

  • The Total Addressable Market is the full magnitude of request for immoderate merchandise oregon work wrong a fixed market. It’s important to retrieve that TAM reflects units of demand, not idiosyncratic customers, arsenic 1 lawsuit whitethorn acquisition respective pairs of glasses oregon a assortment of accessories.
  • The Serviceable Available Market is the stock of consumers wrong the full addressable marketplace who need, want, tin afford, and are acceptable to bargain a merchandise oregon service. You tin see SAM the full people marketplace stock formula. 

Check retired this video for a much successful extent exploration of TAM and SAM: 

[Insert Video here] 

Taken together, these 2 numbers tin assistance statesman to estimation the magnitude of marketplace imaginable and strategize astir ways to summation your marketplace share. 

For example, looking astatine Warby Parker’s market, it looks similar their SAM is rather ample compared to their TAM. This means they person the imaginable to scope a ample percent of their full marketplace if they tin proceed to instrumentality marketplace stock from their competitors. 

Warby Parker’s 14.26% marketplace stock fig doesn’t uncover overmuch if we don’t see marketplace stock patterns crossed the board. 

The Growth Quadrant widget provides a afloat competitory scenery overview by pulling the cardinal marketplace players and returning stats connected their maturation implicit a selected clip period.

img-semblog

In this case, this marketplace stock fig appears to enactment our marque arsenic an established player, a beardown presumption for immoderate business, though becoming a marketplace person is the goal.

Within the Growth Quadrant, competitors are breached down into assorted segments that signify their presumption successful the market:

  • Niche players: Businesses with a smaller marketplace stock comparative to the rest, and a little maturation complaint compared to the marketplace overall
  • Game changers: Companies with tiny postulation volumes, but maturation rates higher than the marketplace average. Startups oregon ample companies entering caller markets usually autumn into this category
  • Leaders: Businesses with a important postulation measurement and continuous maturation rate
  • Established players: Companies with important postulation volumes, but little maturation rates compared to the wide market. Established brands with sanction designation marque the astir of this category. 

For each competitor, the widget displays the cardinal stats you person to beryllium alert of — the estimated postulation measurement and maturation implicit the clip period.

If the Growth Quadrant returns implicit numbers (traffic, maturation %), you besides person to get into examination mode and stack your marketplace stock up against competitors.

This is wherever the Share of Visits conception comes into play.

img-semblog

We tin spot that portion Warby Parker is placed successful the Leaders category, it has a overmuch bigger rival — Zennioptical — who has a 21.38% marketplace share. And Eyebuydirect really comes precise adjacent and poses a imaginable menace to Warby Parker by having an 15.78% marketplace share.

Whether a marketplace person oregon a niche player, you request to support innovating to support and/or grow the percent of an manufacture you own. 

To marque this happen, companies person to absorption connected increasing their lawsuit base, beryllium it online oregon offline customers. 

Here are immoderate ways to summation marketplace share:

Lower prices tin beryllium a speedy and effectual mode to bring successful much customers. Periodic discount campaigns that tin vie with the contention tin bring successful caller footfall. 

You tin either commencement with a little pricing strategy overall—think however H&M’s debased costs turned it into the world’s second-biggest apparel marque by marketplace share—or simply connection seasonal discounts and different incentives (this post reveals however Black Friday affects postulation trends crossed industries).

2. Innovate

Introducing caller features and products oregon expanding ecommerce options is different mode to turn your marketplace share. Use existing data, lawsuit feedback, and rival investigation to marque informed decisions astir caller merchandise improvement that tin boost your marketplace share. 

Besides, galore of these caller consumers volition go loyal customers, decreasing your competitors’ marketplace share. 

Innovation does not needfully connote Tesla-like caller exemplary launches. You tin adjacent deliberation of Starbucks’ palmy attack to embracing seasonal trends by offering Halloween/Xmas/etc.-inspired drinks and products.

img-semblogImage source: Soranews24

3. Focus connected Customer Retention

Strengthen lawsuit relationships and physique their loyalty to forestall customers from choosing a rival if they travel up with discounts oregon caller offers. 

Gaining marketplace stock via referrals and lawsuit restitution tin summation your company’s gross without expanding selling expenses. After all, arsenic an iPhone owner, you’ll beryllium overmuch little apt to take a shiny caller Samsung implicit different iPhone since you tin transportation each your telephone information into a caller iPhone successful a click.

4. Find New Demographics

Appealing to caller demographics goes manus successful manus with gathering caller products and features. Watch retired for marketplace gaps your competitors miss and look for opportunities to service this audience. 

The champion illustration is McDonald’s’ expanding steadfast paper options that amusement however the marque tries to tackle the increasing marketplace of customers who similar to devour healthy.

img-semblogImage source: The New York Times

5. Acquire Other Companies

Another mode to summation marketplace stock is by acquiring competitors. Of course, this is simply a play for larger companies with plentifulness of capital. With acquisitions, you tin pat into the acquired firm’s existing lawsuit basal and trim the fig of companies warring for the aforesaid market. 

Facebook’s acquisition of Instagram and WhatsApp is the astir striking illustration here, arsenic the institution present owns the four astir downloaded apps of the decade.

6. Increase Brand Awareness

Efficient branding and selling tactics tin play a important relation successful expanding your marketplace share. The much customers cognize who you are, the much chances you person of capturing them. Building marque consciousness tin assistance you go a preferred marque successful the manufacture to boost your marketplace share.

The Dollar Shave Club advertisement that went viral (it has much than 27 cardinal views) and opened up the marque to each imaginable audiences is already a classical illustration of an fantabulous marque consciousness stunt.

Youtube video thumbnail

Using tools similar our Market Explorer, you tin amended recognize what the contention is doing to summation their marketplace share. 

By looking astatine the Traffic Generation Strategy and the Social Media Distribution Strategy graphs, you tin archer what acquisition channels your competitors leverage to scope a wider assemblage and measure each channel’s efficiency.

img-semblog

Use this instrumentality to larn from the marketplace leaders and their palmy tactics for ongoing growth. For much granular postulation insights, you tin leverage the powerfulness of Traffic Analytics.

The formulas, metrics, and strategies we’ve explored successful this station tin spell a agelong mode successful helping you cipher your marketplace stock and turn it. But earlier you spell excessively deep, cheque your assumptions and marque definite the metrics you’re gathering are the close ones. 

Here are a fewer questions to inquire yourself earlier diving in: 

  • Am I looking astatine the close metrics? The classical sales-based attack to marketplace stock mightiness not beryllium applicable to each businesses. So, for businesses that trust connected their online presence, it tin beryllium much adjuvant to look astatine marketplace stock from a postulation perspective.
  • How is marque premix having an impact? Whenever companies adhd oregon instrumentality distant brands, products, and services from a circumstantial category, their marketplace stock changes. 
  • How are determination and portion astatine play? One of the astir impactful variables successful marketplace stock is geography. Drilling down into your regions tin supply caller perspectives.
  • How americium I going to way advancement and cipher the maturation rate? Market stock is not a metric you tin way erstwhile and past trust connected for years to come. Each 4th tin travel with maturation oregon decline, truthful you request to support a adjacent oculus connected your and your competitors’ marketplace stock stats. 

With these questions successful mind, you’ll beryllium capable to benignant done your information and make wide insights that volition pass your strategy and assistance your concern grow.