Market share is your piece of the pie. It is important to investment banks, your partner, your sales team and your growth. But what is that pie and how do you calculate your slice?
Although market share is likely the single most important marketing metric, there is no generally accepted best method for calculating it.
There are however three common ways to measure it:
- Dollars or Revenue collected: The owner of Coffee & Tea, a boutique coffee shop, is located in central Manhattan where people spent $10 million dollars at cafe's last year. Coffee & Tea made $1 million dollars during that time. They have 10% market share. (1,000,000/10,000,000 = 0.10).
- Customers served: High-End Remodeling, Inc. has a trade area that covers 10 square miles around their office. They serve the well-to-do housing market. That area includes 100,000 housing units but only 10% are homes that are worth more than $1 million dollars. That means 10,000 housing units are potential customers to High-End Remodeling. The company currently does remodeling for 1,500 homes in that area giving them a 15% market share. (1,500/10,000 = 0.15)
- Volume or Unit sales: Westside Auto Dealership determines that there we're 50,000 cars sold last year in their market. Of those, Westside Auto sold 8,000 cars giving them a 16% market share. (8,000/50,000 = 0.16)
In the U.S. you can get data on the size of the entire pie by looking at the US Census FactFinder. Here you can find the dollars spent for your product or service, by geography, by year.
Depending on what data is available to you, use any, or all of these methods to determine your piece of the pie.
What other methods do you use to calculate your market share?
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