Posted April 5, 2012 by Team AnalyticpediA in Analytics

Understanding Market Share & Sizing

Earth at lens
Earth at lens

The Definition

Market share can be defined as the percentage of all sales within a market that is held by one brand / product or company.Market share can be measured in several ways.However, the two most important measures are by Sales revenue & Sales volume (Quantity OR # of Units). Various Factors Considered for Estimating Share can be summarized into following bulleted points:

  • Measure :Value or Volume Sales
  • Market definition (Geography)
  • Scope of denominator (which other brands/competitors to be included)
  • Time frame length
  • Product definition (brand, product line,Company)

There are few Common Terminologies which one should know before getting his/her hand dirty with analytics in market share or sizing.Like:

TOTAL MARKET SIZE which refers to the annual business in Volume OR Value.

MARKET GROWTH RATE defined as Compounded Annualized Growth Rate ( CAGR ),YoY (SPLY), QoQ, MoM (Previous Periods),etc

MARKET SHARE % which is the break up of market share in % terms, to help identify the top players, the middle and the “minnows” of the marketplace, based on the business conducted.

MARKET SEGMENTATION, extracted by mapping on availability and price parameters, it is possible to identify on a X-Y plane as to which are the spaces which are crowded by service providers and which are the relatively empty spots.

MARKET STRUCTURE in the forms of

– CONCENTRATED: Market leaders own a large part of overall market

– FRAGMENTED: Market leader has small market share and many other competitors

Thus,From the perspective of an Organizations in most of the industry verticals,they are usually keen in looking at following elements continuously over a period of time.

market share 1 300x283 Understanding Market Share & Sizing

– Market Size

– Market Share – Overall and By Segments

– Market Growth, SWOT Markets

– Distribution / Reach

– Penetration, Consumption, SOW

– Consumer Loyalty, H-M-L Consumers, S-C-NC Consumers

– Rating Points of TV / Radio Channels / Programs

– Readership / Circulation of Newspapers, Magazine, Journals

As a result,it becomes indespensible for the analytics team of a company to follow the market-trends,analyse his competencies and try always to be the whale/shark of the blue ocean.

Reliability Analysis

The reliability of a compny/product/service majorly relates to Market Coverage which asks: What % of market is covered by Panel; Comparison of the estimated number with actual via metrics like MAT (Moving Annual Total) & Deriving Reliability Index; Directional Changes by orgs which Could be difference between Actual and Estimate or  Is the estimate directionally same or different compared to actual?

Objective of Market Sizing

Market sizing is done to quantify and validate the business opportunity in order to paint a compelling and defensible picture of that opportunity for stakeholders,Investors,Management,Partners,Customers & Market Analysts / Press.

Thus, Sizing data & processed information is made used in Fundraising[Planning Financial Requirements],Business planning via Validation of business and pricing model assumptions,Setting sales targets and establishing controls and incentives,Competitive analysis,Resource planning,Appropriate production scheduling & Reducing costs of purchasing raw materials.Prioritization of customer segments and associated product development efforts is also a consequence of sizing information/analysis.

There exists various Approach to Sizing Estimation:

Top-Down Approach

Method where the estimation is done from a demand perspective. Populations are segmented by different problem areas (e.g. older population has different needs than younger population for similar problems/products – food, shelter, entertainment, medicine, etc.).The market segment is further divided by the % who actually need product/service.This represents the Total Available Market (TAM). This group is sliced by the % who are willing to pay for the product/service – called the Served Available Market (SAM).SAM is the market size / total demand where Organizations compete for market share.

Bottom-Up Approach:

Method where the estimation is done from a Supply Perspective.Combined sales of every player in the Serviced Available Market (SAM) last year [calculated via Syndicated Market research reports/Industry Association Reports] followed by Estimating the percentage growth in target segment through Consumer Survey / Expert Opinion and finally adding latent market assumptions if applicable.In cases where the market is very new, and likely customers have not yet adopted the product/service,this is a latent market and can be added to the SAM.


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