Companies generally have competitors with whom they compete for a larger share of the market, also known as market share. This is a marketing metric which determines the participation of a business in a particular segment.
The calculation includes identifying the percentage of sales of the app in relation to the total sales of the market. In general, apps use this metric to analyze the performance of their products and better understand the reality of the business.
What is market share?
The idea of market share can be understood in several ways but the main objective is one: to determine how much mobile apps within the same field of activities stand out in front of others.
Another way to see market share is as a reflection of the size of the company’s operation compared to its competitors. This is closely linked to the value of the brand and of the app in the market.
The importance of considering the market share
While the rise of market share may be good, its decline may mean that action needs to be taken to contain the pressure of competition. That’s why analyzing the business can help you understand how its performance is, alongside the ecosystem of other apps.
By calculating market share, it is possible to examine the app’s goals, looking for new opportunities or identify where its weaknesses are. This is also an important metric for identifying market trends and the consumption behavior of the target audience.
Calculating the market share of your app
The calculation of the market share should start with the most basic dimension: the performance of sales in relation to the market. In that sense, we will show you three ways of calculating market share.
If we cross-reference the internal data from the target audience with demographic studies and statistics, for example, it is possible to have a very close notion of the company’s market share.
For this calculus, we use the formula: market share = clients earned by the company / potential customers in the area of operation of the app.
Knowing how to calculate market share according to billing may seem simple, because all it takes is to divide the app’s revenue by the total revenue of its sector of operation in the period.
Market share = company revenue / total revenue from the most relevant companies in the sector
On the other hand, depending on the industry to which it belongs, it’s hard to find that information. This means you may need to make estimates or order studies to achieve a minimally accurate calculation.
The calculation for the market value follows the same reasoning as the previous criteria: market share = company market value / total market value of the most relevant companies in the sector.
Market share components
As we have seen, the market share is a versatile metric: we can apply the formula according to business objectives. Breaking down the market share, we come up with three main elements:
- Customer share: this is the percentage of customers reached in relation to the total number of customers served by the competition;
- Usage index: comparative percentage between the average ticket or recurring average revenue of customers and the same results of the competition,
- Penetration share: is the percentage of customers reached in relation to all potential customers in the market.
Considering this points, it is possible to find the market share of a specific product, a sales channel or even the participation of a certain group of consumers. Market share numbers alone don’t say much since the results depend on their interpretation.
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