Article

Market Share 101: What It Is, How to Calculate It & Why It’s Important

Market share serves as a long-time leading indicator of a brand or retailer’s performance and competitiveness within the market. At its root, it helps declutter a challenging landscape and enables companies to make more informed decisions and empower growth.

Market Share Basics

What is market share?

Market share is a company’s sales revenue as a percentage of total sales for the category, industry, or market in which it operates. It can be calculated for brands, retailers, or any business looking to measure their sales in relation to their competitors and the market as a whole.

How to calculate market share

Calculating market share can be accomplished by dividing a company’s sales by the total sales made within its market. It is typically expressed as a percentage.

For example, imagine you’re a marketer with one of the largest health & beauty brands in the United States. To calculate your market share, you’d want to take your brand’s total health & beauty sales for a specified time period– say, the past 12 months– divided by total health & beauty sales in the US in the past 12 months. The resulting percentage is your brand’s market share within the US health & beauty market.

market share calculation

Why is market share important?

Calculating market share provides companies with a high-level view into their own performance, and can help to benchmark performance against competitors. Tracking market share over time also allows businesses to see whether they’re gaining or losing share, and which competitors they need to keep an eye on. This gives companies a great starting point to diagnose brand health.

While standard market share measurements allow for this high level view, in-depth measurements with added consumer context can give additional views of market share, such as whether a company is winning or losing a certain demographic of consumers. This ability to dig deeper can help a company identify which opportunities make the most sense to focus on.

Measuring Market Share

Traditional Market Share Measurement

Historically, market share calculations have leveraged point-of-sale (POS) data. Syndicated POS data is based on an aggregation of sales data provided by cooperating retailers. This data is third-party, large-scale, and highly standardized.

Limitations of Traditional Market Share Methods

While the standardization of point-of-sale data has the benefit of easy procurement, cost-effectiveness, and the ability to drill into product specifics, it also comes with limitations, particularly when used to calculate market share. Since it comes from a subset of cooperating retailers, certain channels with less retailer cooperation are often under-represented. This is particularly true of eCommerce, which is increasingly important to capture & understand in an omnichannel world.

market share quote

When the concept of market share from POS data was brought to life decades ago, most retailers cooperated and shared their data. There were fewer players in the space, little fragmentation, and a large majority of dollars moving through brick-and-mortar locations. The landscape has now become broader, with more spend occurring outside of the subset of the traditional, brick-and-mortar retailers that POS data tracks. An estimated 55% of shopping is now occurring outside of what POS systems are capable of tracking.

Market share calculations based on POS data also lack consumer context, which is crucial for informed decision-making. A singular market share number provides a baseline for decision-making, but additional cuts like share among certain demographic or geographic groups of consumers give the most precise view.

The Future of Market Share

There is a clear need in the market for tracking that goes outside of historical standards and conventionality. It has never been more critical to have clear, omnichannel market share measurement that links the figure to the most important aspect: the consumer. Data alongside added context with people-focused attributes allows for a more granular and consumer-driven analysis of growth segments and opportunities for a brand.

Numerator TruView steps in to address shifting market share needs. Leveraging Numerator’s 1 million+ household Measurement Panel, Numerator TruView empowers brands to not only understand their total omnichannel market share but do so with added consumer-specific demographic cuts. TruView pushes traditional market share measurement past the limitations of retailer contributions and helps companies identify whether they’re winning or losing share for these consumer segments in the complex omnichannel landscape.

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