Market Share – How to Calculate it

Rarely, I come across someone who tends to leave a lasting impression on me because they think logically and write incisive.

Estelle Metayer one of these people. Her insights and thinking in higher marketing and information about our competitors are very powerful. But his ability to translate these concepts to implement changes on day-to-day what makes it such a powerful communicator. Dear, maybe I'm in love!

In any case, here's a two part adaptation of his article on how to calculate market share. To say that, this has helped me very much is not enough.

Have you ever been in a situation where your competitors to claim market share was not even close to the calculations that you gave to your senior managers? Or where people differ in the organization will use different numbers? Where annual reports claimed market shares were not able to go back in your calculations? Understand how you can calculate - and use - market share can be extremely useful.

This article will discuss some of the techniques you can apply when dealing with a market share calculations:

    Why is proper accounting of market share so important?
    Define your market share according to your objectives;
    Market share calculations and pitfalls to avoid;
    How to calculate market share when no data is available.

Why is proper accounting of market share so important?

As a marketing manager at Starbucks described in an excellent article about market share in the retail world, the basic themes typically include any, or all, of the following:

Market potential - "How dollars in this market for my concept?"

Market share - "How much of the potential in the market I continue?"

Market Opportunity - "Which markets offer the greatest opportunity for growth?" But market share calculations can also serve other purposes. Can be used to:

Challenge common wisdom One of my clients in electronic company consistently claimed his company owned 80% of the world market in its segment. However, we soon noticed that the accounting team and was responsible for maintaining the market share calculations, up to date, using the following method to reach their calculations:

Number of contracts won / number of contracts follow

Because the company only after half of the total available contracts, this measure not convey an appropriate picture of reality - namely that the company owned really less than 50% of the total market.

Avoid blind spots and avoid looking for substitutes: Imagine yourself as a marketing manager for Coca-Cola. What is your market share? Approximately 60% of the world market against Pepsi? Not really. Coca-Cola management will not only include the direct competitors in their (Pepsi) market share, they can also include soft drinks (Sprite, juice, etc.) or even any Food and Drink products destined to cool down a dry throat. For example, can include ice cream. This approach enables the company to include alternative products / lifestyles in order to avoid blind spot - a new trend or product reaches the market, such as increased use of smoothies, would not be tracked differently.

In the same vein, the makers of corn flakes only compete against one another? Or they will also compete against manufacturers of other ready to eat cereal? What about hot cereal? What about bacon and eggs?

Introduce common sheet to work: In many companies, a variety of market share calculations. Calculate calculate market share based on revenue; the marketing department uses the number of goods sold; the strategic planning department will look at the bigger picture, etc. As you can imagine easily, working ' The same set of numbers is useful. Will avoid confusion and conflicting messages (annual reports, discussions with journalists, etc.)