The market share account is necessary to make effective management decisions. While the market share calculation formula is very simple, there is a big mistake in how to provide and interpret data. Below, you will discover in entertaining format where hunting lies, so you can avoid this in your work.
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Late evening in the office
Drawing the soft glow of the Sydney horizon is the perfect background where Alex sat on his chair, staring at interest in numbers on his screen. Saas, which specializes in cybersecurity solutions, has been steadily growing over the past few years. But now, the numbers drew a disturbing picture – its share in the market has been constant during the past three months. Was his company stagnant?
Alex built his works from A to Z. From the late nights the product development to aggressive marketing campaigns, everything was indicating success. However, despite all his hard work, he could not ignore the numbers that stare with him. The market share for the first quarter was fixed at 10 % – January, February, March.
Was this a sign of failure? He could only feel frustrated. His dream of controlling the space of cybersecurity was sliding. He always thought that growth was the key to business success, but now, the recession seemed to have started. He was a silent killer that infiltrated, without anyone noticing it, but he threatened with everything that he worked hard for him.
Only then, Daniel, his old friend and a successful businessman, entered the office. Daniel’s calm confidence was clear, a flagrant contradiction with Alex’s frustration. “My friend, it seems that you need a break.” “Let’s have a drink and talk about it. Whatever it is, it is not the end of the world.”
Alex shook his head. “It is not so simple, Daniel. The market share for my company is stuck. I don’t know how to fix it. I think we want.”
Daniel stopped and the size of his friend. “Well, a sufficient work for today. Let’s dig this together. I’m sure there are only more than numbers. Let’s get to know it.”
Together, they are a dove in market share accounts. Daniel bowed, referring to the numbers on the screen. Daniel said: “You see, you are calculated by the market share by looking at the percentage, but this is only part of the image.
After that, Daniel Alex took through three different market share scenarios, each explains how small changes can significantly affect the interpretation of data when divided into decade and hundreds of hundred:
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Screen 1: The market share grows
January: 10.15 %, Feb: 10.29 %, March: 10.48 %.
The market share is increasing gradually. Small increases like this may look little, but over time, they lead to growth. -
Screen 2: The market share is decreasing
January: 10.45 %, Feb: 10.20 %, March: 10.05 %.
Despite the stable appearance at the beginning, this style indicates a decrease in the market share, which will be missed if you only look at the round numbers. -
Screen 3: The market share is stable
January: 10.25 %, Feb: 10.24 %, March: 10.26 %.
Here, the market share remains the same, and it is a slow but fixed situation in the market.
“So, as you can see, Daniel continued, raw numbers can be misleading if you don’t look deeper. What seems as if the recession may actually be gradual growth or decline when divided into decimal. You need to calculate the smallest changes to get a true image of the place where you stand.”
Alex’s eyes lit up with understanding. “Wait a minute … So, if I look at such numbers, I can see that the market share of my company is actually growing, even if it is stagnant at first glance!”
Daniel nodded with a smile. “Exactly. Sometimes the biggest mistake is to misuse what seems like a recession. When you disassemble it and use the right accounts, you can see the real growth potential.”
Alex felt an increase in relief and excitement. The realization of his company was already growing – albeit slowly – raises a renewed sense of the goal. The pressure he felt began to lift.
With his newly discovered clarity, he and Daniel left the office, heading towards the evening celebration. Alex could only feel proud of the numbers. Armed with the correct approach, Alex was ready to transfer his company to new horizons.
With a feeling of gratitude, he raised his cup to Daniel. “Thank you, my friend. I think I found the key to canceling our growth.”
Daniel smiled. “Just remember: the numbers are strong, but their understanding is more.”
Market share calculation format
The market share is an important measure to understand the company’s position in the market. It is calculated using the following formula:
Market share = (company sales / total market sales) x 100
Although the formula is clear and direct, how to deal with the resulting numbers can make a big difference. Without decimal places, the company’s market share can look more stable or volatile than it really is. For this reason it is important to observe both full numbers and decimal system (tenths and hundreds) to obtain a more accurate image of directions.
Why do you care about the accuracy in the market share account
The market share closer to full numbers can lead to the following defects and potential errors in the analysis:
- Precision The difference in tenths and hundreds can be very important, especially in highly competitive markets with companies that have similar market shares. For example, the market share will become 4.4 % and 4.6 % when it is rounded to full numbers 4 % and 5 %, and it is a deformed perception.
- Distical comparisons – Small changes in the market share (for example, from 4.9 % to 5.1 %) can lead to a “jump” when rounding (from 5 % to 5 %), which creates a sign of great growth when it is not actually.
- Summarize issues – If all market shares are rounded to full numbers, the amount may not add up to 100 %, which may create confusion and questions about the reliability of data.
- Prediction errors – Trends based on round data can lead to less accurate prediction models, as part of the dynamics of changes is lost.
- Simplify the competitive image – The smaller players may be excluded if their share is very small so that it cannot be rounded (for example, 0.4 % 0. %, although this is actually, this is already an important part in the specialized markets).
In general, the use of the most accurate values (tenths and hundreds) provides a more realistic vision of the company’s position in the market and helps avoid errors of the analysis.
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MTP Business Boost is a series of expert publications full of real world strategies, and transforms complex ideas into simple and implemented advice you can apply immediately (MTP symbolizes marketing, technology and psychology). Author Jane Esif is a marketing expert with an experience of more than seven years in digital marketing. It flourishes in the very competitive B2B markets. Its focus is on growth marketing, market research, and the development of strategic marketing of the SAAS complex product – a platform for government and private purchases.
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