As a marketer, you know that measuring your company‘s performance against competitors is crucial. One of the most important metrics for competitive benchmarking is market share – the percentage of an industry‘s total sales that a particular company captures.
In this guide, we‘ll dive deep into everything you need to know about market share, including:
- Why market share is a critical metric for marketers
- How to calculate your company‘s overall market share
- How to measure competitor market share and share relative to a specific rival
- Real-world examples and data from industries like tech, automotive, and retail
- Proven strategies to increase your market share
- Essential tools and data sources for market share analysis
By the end, you‘ll be equipped with the knowledge and tactics to become a market share master. Let‘s get started!
Market share is a key indicator of a company‘s competitive position in its industry. But why exactly should marketers care about it? Here are three big reasons:
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It shows if you‘re winning or losing to competitors. Gaining market share means you‘re capturing more industry sales than rivals. Losing share signals competitors are outperforming you.
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It predicts profitability. A study by McKinsey found that companies with a market share greater than 40% were the most profitable in their industries. Market leaders benefit from economies of scale, pricing power, and brand recognition.
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Investors use it to value companies. Equity research analysts frequently cite market share as a reason to buy or sell a stock. All else equal, companies gaining share tend to have higher valuation multiples than those losing share.
While important in all industries, market share is most critical in mature markets with stable overall demand. In high-growth sectors, a company can deliver strong sales increases even if losing share to competitors. But in slow-growth industries, market share gains are essential to driving revenue growth.
Now that we know why market share is so important, let‘s look at how to calculate it.
The formula for a company‘s market share is simple:
Market Share = Company‘s Sales / Total Industry Sales
For example, if the U.S. athletic footwear industry generates $20 billion in total annual sales and Nike records $8 billion in U.S. footwear sales, then Nike‘s market share is:
$8 billion / $20 billion = 0.4 or 40%
To calculate market share, you‘ll need two numbers:
- Your company‘s sales for a specific time period (usually a fiscal year) and geographic market (like the U.S.)
- The total industry sales for that same time period and market
Getting your company‘s sales data is easy – just pull it from your internal reporting systems or published financial statements.
Determining the total industry sales is trickier, as it requires external research. Here are some of the best data sources:
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Industry associations: Many industries have trade groups that aggregate sales data from member companies. For example, the Automotive News Data Center tracks U.S. vehicle sales by manufacturer.
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Market research firms: Analysts like Gartner, IDC, and Forrester publish market share reports for the industries they cover, especially in technology. For example, here‘s Gartner‘s 2021 market share data for the cloud infrastructure market.
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Government data: The U.S. government collects detailed industry sales data through agencies like the U.S. Census Bureau, Bureau of Economic Analysis, and Bureau of Labor Statistics.
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Company financial reports: Public companies often cite third-party estimates of industry sales and market share in their annual reports and investor presentations. Look for these nuggets in the "Industry Overview" or "Competition" sections.
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Equity research: Stock analysts build detailed models of industry sales and company market share to make investment recommendations. You can access their reports through brokers like JPMorgan and Morgan Stanley or financial data providers like Thomson Reuters.
If those sources are too expensive or not granular enough, you can roughly estimate industry sales by summing the total revenues of the industry‘s largest public companies. While not comprehensive, this can give a directional sense of the competitive landscape.
Competitive analysis is a key part of any marketer‘s job. So beyond calculating your company‘s overall market share, it‘s critical to understand how you stack up against specific rivals. To do that, simply use competitor sales in the market share formula:
Competitor Market Share = Competitor‘s Sales / Total Industry Sales
For a real-world example, let‘s look at the U.S. wireless carrier market in Q1 2021:
| Carrier | Q1 2021 Subscribers (MM) | Market Share |
|---|---|---|
| Verizon | 121.3 | 29.4% |
| AT&T | 100.4 | 24.4% |
| T-Mobile | 103.4 | 25.1% |
| Total Industry | 412.0 | 100% |
Source: Fierce Wireless
To calculate AT&T‘s market share, we divide its Q1 subscriber count by the industry total:
100.4 / 412.0 = 24.4%
Verizon leads with 29.4% share, followed by T-Mobile at 25.1% and AT&T at 24.4%. This data helps these companies see where they stand competitively and if they are gaining or losing ground each quarter.
Another helpful metric is relative market share, which benchmarks your share against a specific competitor:
Relative Market Share = Your Company‘s Sales / Competitor‘s Sales
If Adidas has $4 billion in U.S. sales and Nike has $8 billion, then Adidas‘ relative share vs. Nike is:
$4 billion / $8 billion = 0.5 or 50%
So for every $1 of U.S. sales Nike generates, Adidas makes 50 cents. Tracking this over time would show if Adidas is catching up or falling further behind Nike.
Let‘s apply what we‘ve learned to real competitive situations in a few major industries. These examples show why executives and investors care so much about market share.
Cloud Infrastructure Services
Cloud computing is one of the hottest sectors in tech, with total global spending expected to top $1 trillion by 2024. But which vendors are winning the battle for market share? Here‘s the latest data:
| Company | 2021 Market Share |
|---|---|
| Amazon Web Services (AWS) | 40.8% |
| Microsoft Azure | 19.7% |
| Google Cloud | 7.1% |
| Rest of Market | 32.4% |
Source: Gartner
AWS is the clear market leader, with a dominant 41% share. Microsoft is a distant second at 20%, while Google trails at just 7%. This data explains why Amazon continues to invest aggressively in AWS and why Microsoft and Google are sprinting to catch up. Having a large share of this massive market translates into huge profits.
Electric Vehicles
The automotive industry is rapidly shifting from gas-powered to electric vehicles (EVs). Within the nascent U.S. EV market, Tesla is the undisputed king:
| Automaker | 2021 U.S. EV Market Share | 2021 Total U.S. Market Share |
|---|---|---|
| Tesla | 72% | 3.4% |
| Ford | 7% | 12.7% |
| Hyundai | 5% | 4.4% |
| Volkswagen | 4% | 3.3% |
Sources: Car and Driver, Wards Intelligence
Tesla captured a staggering 72% of all U.S. EV sales in 2021, far outpacing traditional auto giants like Ford (7% EV share) and Volkswagen (4%). This explains Tesla‘s premium stock valuation compared to other automakers.
However, it‘s important to keep the overall context in mind. EVs still made up only 3.4% of total U.S. auto sales in 2021. So while Tesla dominates the EV market, its slice of the overall U.S. auto industry (3.4%) is similar to Volkswagen‘s (3.3%) and far below Ford‘s (12.7%).
U.S. Grocery Retailers
The U.S. grocery industry is brutally competitive, with large established chains battling upstarts and each other. Here‘s how the major players stacked up by U.S. market share in 2021:
| Grocery Retailer | 2021 U.S. Market Share |
|---|---|
| Walmart | 21.5% |
| Kroger | 9.9% |
| Costco | 7.1% |
| Albertsons | 5.0% |
| Publix | 3.9% |
| Target | 3.4% |
| Ahold Delhaize USA | 3.2% |
| WinCo Foods | 1.1% |
| Wakefern Food Corp. | 1.1% |
| Dollar General | 1.0% |
Source: Retail Dive
Walmart is the 800-pound gorilla, with a 21.5% share that‘s more than double #2 Kroger‘s 9.9%. This scale allows Walmart to undercut rivals on price while still turning a profit.
Interestingly, discount chains like Costco (7.1%), Target (3.4%), and Dollar General (1.0%) are taking share from traditional supermarkets through lower costs and differentiated shopping experiences. This shows how market share can shift as consumer preferences and competitive dynamics change.
Now that we‘ve seen how to calculate market share and analyzed real-world examples, let‘s explore seven proven strategies to boost your slice of the industry pie:
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Launch innovative products: Develop unique offerings that make customers switch from competitors. Example: Apple gaining share in smartphones with cutting-edge features.
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Grow distribution: Expand into new sales channels and geographies where competitors are weak. Example: Nike increasing share by selling through its own stores and website.
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Cut prices: Reduce prices to attract price-conscious customers from rivals. Example: Walmart using scale to offer unbeatable grocery prices.
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Acquire competitors: Buy rival companies to capture their customers and reduce overall competition. Example: Microsoft leapfrogging Google in cloud by acquiring GitHub.
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Invest in marketing: Boost brand awareness and consideration through advertising, content marketing, social media, and PR. Example: Geico‘s ubiquitous ads making it a household name in insurance.
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Improve customer experience: Provide exceptional service and support to turn customers into loyal advocates. Example: Nordstrom‘s legendary commitment to customer satisfaction.
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Focus on untapped segments: Target customer groups that are growing fast and underserved by competitors. Example: RIA gaining share in wealth management with a focus on younger investors neglected by traditional brokerages.
The key is picking strategies that fit your company‘s unique strengths and holes in competitors‘ offerings. Combining multiple strategies, like great products with memorable marketing, is especially effective at stealing share.
Manually calculating market share in Excel is time-consuming and prone to errors. Fortunately, there are many tools that can help you track and visualize your market share automatically:
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Attest: Survey-based brand tracking tool that measures your share of customer preference versus competitors.
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BrandMentions: Social listening platform that shows your share of voice across social and web channels.
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Meltwater: PR and social media monitoring suite that tracks your brand‘s share of media coverage and sentiment.
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SimilarWeb: Web traffic analysis tool that estimates your website‘s market share versus rivals based on visits and engagement.
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Strategyn: Jobs-to-be-done market research platform that surveys customers to measure your share of preference in a given market.
Using a combination of market share tools, internal sales data, and competitive research will give you the clearest picture of where you stand and what levers to pull to accelerate your growth.
Conclusion
Earning market share is the ultimate prize in business. Companies that are the biggest fish in their industry pools cast a large shadow, have the most pricing power, and generate the fattest profit margins.
As a marketer, regularly measuring and benchmarking your company‘s share versus major rivals should be one of your top priorities. By understanding where you‘re winning and losing, you can craft data-driven strategies to attack the competition.
In saturated markets, defending your share from hungry challengers is just as critical as playing offense. Continually gather competitive intelligence on emerging players with disruptive offerings that could lure your customers away.
At the end of the day, if you relentlessly deliver more value to customers than your rivals, you‘ll capture more than your fair share of the market. Everything else is just noise.