Understanding Market Share: Definition, Importance, and Metrics

As we know, market share is a very determining factor for the success of a business. Then actually, what is the meaning of market share , and what is its purpose?

The answer is in this article. Here I will discuss in detail several things related to market share , including:

  • A brief explanation of what market share is .
  • Types of market shares .
  • Measuring the company’s success in market share .
  • What is the purpose of market share analysis ?
  • How to find out the market size.
  • How to increase market share .
  • Advantages and disadvantages of market share.

If you want to know more about market share, you will definitely like reading this article. Let’s get started!

Understanding Market Share

The term market share is an English word consisting of two words, namely market and share .

According to the origin of the word, the word market means market, while the word share means part, share, and share. In simple terms, the notion of market share is the part of the market that is controlled by a particular company or product.

So, the notion of market share is part of the entire demand for an item that reflects the consumer group based on its characteristics (market segment) . Classification of consumers can be grouped based on income level, age, gender, education, and social status.

So, market share is the part of the market controlled by a company from all potential sales, generally expressed as a percentage (%).

Market share can also be defined as the percentage of total sales of a company’s products from all sources, divided by the total sales of products (goods and services) in a particular industry.

simple example,

If consumers as a whole buy 100 shampoo products, and 35% of those purchases come from XYZ company, then XYZ company manages to control 35% market share.

Types of Market Share

Market share can be divided into two types. The following are the types of market share and examples:

1. Main Market (Primary Market)

The primary market is the market in which securities are created. In this market, companies sell new stocks and bonds to the public for the first time.

An initial public offering (IPO) is an example of a primary market. In this trade, investors have the opportunity to buy securities from a bank that does initial underwriting for certain shares.

An IPO occurs when a private company issues shares to the public for the first time.

2. Secondary Market

The secondary market is the market where investors buy and sell securities they already own. This market is called by most people the “stock market”, although shares are actually sold on the primary market when they are first issued.

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The national exchange, such as the Stock Exchange, is an example of a secondary market.

Measuring Company Success in Market Share

Market share is the percentage of sales recorded by a company of the total sales of its competitors combined in a given industry.

That is, market share is one of the indicators used by a company in measuring their level of success against their competitors.

For example, company XYZ in 2008 had a target market share of 10% of the total market. To reach the target market, a promotion fee of Rp. 100 million is needed.

If after marketing it turns out that XYZ’s market share is more than 10% (eg 15%), it means that the company’s performance is going well.

On the other hand, if in that year the market share obtained was only 9%, then it shows that the marketing performance is not good and the company will face efficiency and effectiveness problems.

There are several factors that need to be explored in assessing the problem of companies that are not able to achieve market share, namely:

  • The size of the market share is too high.
  • There are more and more new competitors in the same industry.
  • There is a decline in the competitiveness of the company.
  • Promotions that cannot reach the target market or are not on target.

Purpose of Market Share Analysis

After knowing what market share is, of course we also have to know what the purpose of market share analysis is.

In general, a company’s market share can be used as an indicator of the company’s competitiveness in a market. So, the goal is to find out how well the company is performing and growing against its competitors.

This metric can also be used to measure changes in sales revenue so as to assist companies in evaluating primary demand in a market.

Usually the growth in sales levels that comes from primary demand will make it cheaper and will benefit the company, rather than the market gained from taking part in competitors in the same industry.

Meanwhile, the loss experienced in a market share is an indication of a major problem in the long term. This requires a change in the marketing strategy used.

Any business or company that has a below-average market share will likely not be able to survive the competition. This is because the trend of market share and sales of the company’s products is also an early indicator of opportunities or problems that may arise in the future.

Based on research, market share is an asset that is needed by every company. However, many economists say that market share is not the goal or basic criterion of an economic policy.

That way, market share can only be used as the main basis for measuring the performance of companies that are competing in a market.

Market share can be used as a reference for building a company system, both in formulating and making policies. And of course the policy is made based on considerations related to the impact of each policy on the market share of the company’s competitors.

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How to Know Market Size

In order to know and determine the size of the market and its market share , a fairly in-depth market research is needed. Therefore, entrepreneurs usually define the market to be targeted so that they can see the potential of the market.

Furthermore, after knowing the size of the market and knowing the targeted market segment, the next step is to study who the competitors in the market are and how many markets they have mastered.

Companies that make strategic plans must develop marketing mix strategies, and narrow product segmentation so that promotions are right on target.

As an example,

Company XYZ which is in the beverage industry. It’s not enough to just explain that the business is drinks, but it must be more focused.

For example, coffee drinks, tea, fruit flavors, and so on.

How to Increase Market Share

Understanding the meaning of market share is important. The reason is, by knowing the target market share, a company can understand its strengths and weaknesses and can anticipate the market.

Understanding the advantages and disadvantages of a company can be done with a SWOT analysis . That way, a company can do various things needed to increase productivity.

For example, changing prices, changing services, increasing marketing promotions, changing distribution methods , and so on.

Then how to increase market share when a company starts a trading business. Quoted from various sources, here are brief tips from business people:

  1. Choosing a business that is still relatively new and has not many competitors from other companies.
  2. Have confidence that the company will be successful in the business it runs.
  3. Determine the company’s vision and mission regarding future business targets.
  4. Take into account the strength of competitors in the same industry.
  5. Pay attention to price movements in the targeted industry and determine the most suitable price.
  6. Creating and building a market network so that the business becomes bigger.


From the explanation above, it can be concluded that market share is the portion of the market that is owned or controlled by a particular company or product.

The percentage of market share is used to measure the competitiveness of a company in a particular industry. That way, the company can see how well it is performing and developing against competitors.

Thus a brief explanation of the meaning of market share or market share, how to find out market size, objectives, types, and how to increase market share. Hopefully this short review is useful and adds to your insight.