Glossary

Market share

A business’s portion of total sales in a defined market and period, measured by revenue or units sold.

Why it matters

Sales figures tell you how much your business sold. Market share adds context by comparing those sales with the total for the market you have defined. It can help you see whether your position is changing as the wider market grows or shrinks.

Define the product or service category, geography and time period before calculating a percentage. Revenue share compares sales value; unit share compares quantities sold. Use the same basis for your business and the market total, which must include your own sales.

A simple example

Illustrative example, not client research

Suppose a prepared-meal delivery service has annual revenue of $120,000 in one town, and total revenue for that category and town is estimated at $1,200,000.

Calculate revenue share

Divide $120,000 by $1,200,000 and multiply by 100. The service has an estimated 10% revenue share of that defined market.

Document the sales period and the source of the market estimate so another person can check the calculation.

Check the market boundary

That percentage describes prepared-meal delivery in the town, not all food spending or the number of households served.

If you change the category or geography, recalculate both your comparable sales and the market total.

The figures are invented to explain the calculation. In practice, incomplete competitor data and inconsistent category definitions can make market share an estimate rather than a precise measurement.

Market share is not sales growth

Your sales can rise while your share falls if the overall market grows faster. Share can also rise in a shrinking market even when your sales decline.

A larger share does not automatically mean a healthier business. Consider margins, the cost of acquiring and serving customers, retention and your ability to deliver alongside the percentage.

Before using a market-share figure

Do the category, geography, period and measurement basis match on both sides of the calculation?
Does the market total include your sales, and how reliable is the estimate?
What do the share trend and your profitability tell you together?

Market sizing: Estimating the number of potential buyers or the sales value of a defined market over a stated period.
Market segmentation: Dividing a market into groups with shared needs or characteristics, so you can decide whom to serve and how.
Positioning: Defining how you want a particular audience to understand your offer compared with the alternatives.