How to Calculate Market Share [Formula + Examples]

What Is Market Share?

Market share represents the percentage of an industry’s total sales, revenue, or customer base that a company controls. It shows how a business performs compared to its competitors in a specific market.

Why Is Market Share Important?

1. Measures Competitiveness – A higher market share means a company is a dominant player in its industry.
2. Guides Business Strategy – Helps determine if a company should expand, pivot, or improve pricing and marketing strategies.
3. Attracts Investors – A growing market share signals strong business performance and future growth potential.
4. Improves Profitability – Larger market share often leads to economies of scale, lower costs, and stronger brand recognition.

👉 Example: If a company sells 200,000 smartphones in a year while the total smartphone industry sells 10 million units, its market share is 2%.

How to Calculate Market Share

Market share is typically calculated in three different ways based on revenue, sales volume, or customer base.

1. Market Share by Revenue

This method calculates what percentage of total industry revenue a company earns.

Formula:

Market Share (%) = (Company Revenue / Total Industry Revenue) × 100

Example:

1. A company generates $50 million in annual revenue.
2. The total industry revenue is $500 million.
3. Market Share = (50M ÷ 500M) × 100 = 10%.

2. Market Share by Sales Volume

This method calculates what percentage of total industry units sold belongs to a company.

Formula:

Market Share (%) = (Company Sales Volume / Total Industry Sales Volume) × 100

Example:

1. A car manufacturer sells 1 million vehicles.
2. The total industry sells 20 million vehicles.
3. Market Share = (1M ÷ 20M) × 100 = 5%.

👉 Best For: Industries where pricing is relatively uniform across products (e.g., automotive, smartphones, fast-moving consumer goods).

3. Market Share by Customer Base

This method calculates what percentage of the total industry’s customers a company serves.

Formula:

Market Share (%) = (Company Customers / Total Industry Customers) × 100

Example:

1. A streaming service has 30 million subscribers.
2. The total streaming market has 300 million subscribers.
3. Market Share = (30M ÷ 300M) × 100 = 10%.

👉 Best For: Industries with subscription-based models (e.g., streaming services, cloud storage, telecommunications).

How to Analyze & Improve Market Share

1. Track Market Share Over Time

Market share isn’t static—companies should analyze changes and determine whether they are gaining or losing ground.

👉 Action Step: Use quarterly or annual reports to measure performance and adjust business strategies.

2. Identify Competitive Advantages

Businesses with a unique value proposition can differentiate themselves and gain market share.

👉 Action Step: Improve product innovation, pricing, and marketing strategies to attract more customers.

3. Expand Market Reach

Entering new geographic markets, customer segments, or product categories can help companies grow their market share.

👉 Example: Tesla expanded into China to increase its global market share in electric vehicles.

4. Invest in Customer Retention

Higher retention means fewer lost customers, which helps maintain or grow market share.

👉 Action Step: Use loyalty programs, personalized offers, and excellent customer service to boost retention.

5. Optimize Pricing Strategies

Competitive pricing can help win more customers and increase sales volume.

👉 Example: Apple maintains high market share by using premium pricing and strong brand positioning.

6. Increase Marketing & Brand Awareness

Companies with strong branding and advertising campaigns tend to capture a larger market share.

👉 Example: Coca-Cola invests heavily in global marketing to maintain its dominance in the soft drink industry.

Common Market Share Calculation Mistakes to Avoid

1. Using Outdated Industry Data

Market conditions change, so businesses should use the latest industry revenue, sales, and customer data.

2. Ignoring Market Segmentation

Market share should be analyzed within relevant segments, not just across an entire industry.

👉 Example: A company selling luxury watches should compare market share within the premium watch segment, not the entire watch industry.

3. Overestimating Market Share Potential

Assuming that a company can easily capture 10-20% of an industry is unrealistic—growth takes time and investment.

4. Confusing Market Share with Market Growth

A company may have a growing market share in a shrinking industry, meaning total revenue could still decline over time.