Revenue for some companies is the most important indicator of a company’s market share because the revenues represent the actual size of its work; the revenue enables it to pay its obligations.
Market share in terms of revenue refers to the volume of income obtained by the company relative to the total income of the companies operating in the market or the company’s field of work. This indicator is calculated over a specific period, usually a year.
Revenue is the financial value of sales during a specified period. Therefore, the market share in terms of revenues is one of the essential indicators for calculating the market value of companies. This article will show you the market share in terms of revenue in more detail. Let’s start
What market share by revenue means?
The market share by revenue indicates the company’s incoming cash flows through which the company needed to pay its commitments.
This indicator shows the amount of money the company can get from the market, compared to the amount of money in the market.
The main objective of measuring the market share by revenues is to take a general picture of the company’s income compared to the income of competing companies.
Owners of companies use the market share by revenue to measure their size and position in the market.
The market share by revenue also indicates the assessment of customers’ choices among competitors. The more customers in the market choose your products, the higher your market share.
Why market share by revenue is importance?
The market share indicator in terms of revenue is significant because, in short, it shows how competitive the company is.
It also shows the amount of money that the company can obtain during a specific period.
Therefore, owners and investors pay close attention to and continuously monitor the percentage of the market share between increase or decrease.
How is the market share by revenue calculated?
If you cannot calculate the market share by revenue, you can follow the following steps to help you know it.
Select the period
In the beginning, you have to define the period in which you want to analyze the percentage of the company’s sales. This period is usually a quarter or year.
Calculate the company’s total revenue
If your company has several products or services, it is best to select a specific product to provide analysis because a comprehensive study is often not useful.
Calculate the total revenue of the selected product in the specified period.
Get the total market revenue.
One of the most important steps you should look for is the total market revenue, which is the amount of money for sales from that specific product in the entire market.
You can get these values from many places, such as industry-specific trade associations or public reports.
But you should be aware that some companies charge fees to provide information on their sales in the national and international market sectors. So, you need to pay for some information.
Equation: Divide your company’s revenue by the total market revenue
To get the percentage of market share by revenue, you would have to divide the company’s revenue by the whole market or industry revenue.
In the sense that you divide the value you sold by the value that other companies sold for the same product (including your sold) in the same period, the result is your market share.
The market share in terms of revenue is obtained in percentage terms by multiplying the output by 100.
Market share by revenue during the period = (the company’s revenue during the same period / total market revenues during the same period) * 100.
How is the market share by revenue increased?
The market share in terms of revenue indicates the volume of income that the company has obtained, comparing it with the total revenue of other companies in the market.
Obtaining additional market shares is by increasing the size of the total market. The market share can increase through one of the following methods:
- Attract many new customers, provided that they are from different categories.
- Reducing or increasing the prices of the service or product helps increase the market share in terms of revenue for the company.
- Developing the product and making it better than competitors’ products in terms of meeting the desires and aspirations of customers
- Increase advertising and promotional campaigns.
- Choosing the right market is usually through the presence of a high-quality product with a distinctive brand.
- Use innovation and creativity in product development without changing the brand.
- Always making sure you know what customers want.
- Obsessive thinking is by acquiring companies that have a good impact on your company’s products or services.
- Rely on affiliate or referral marketing programs in case you are unable to get new customers.
Increasing the market share can be done through more than one method. The previous methods are the most common ones.
What is the difference between market share by revenue and market share by volume?
Market share by revenue reflects the prices of the products.
The formula for a percentage is:
Company’s revenue from sales x 100/total market sales revenue
While, market share by volume indicates sales volume, the number of units sold by your company, which we usually get as a percentage.
Its formula for obtaining market share is:
The number of units sold x 100/total sales of market units.
The market share by revenue represents the financial value of the market share in terms of sales volume.
But you can get different information from the previous two indicators. As an example, the number of units sold may be few, but the price of these units is very high.
In this case, you can obtain the company’s financial value only through the market share by revenue because the market share by volume cannot indicate the company’s financial flows.
Finally, you can say that they are two indicators of the same company’s movement in the market, but from different angles. Each indicator can give you additional information from the other.
The market share indicator in terms of revenue is critical because, in short, it shows how competitive the company is. It also shows the amount of money that the company can obtain during a specific period.
Therefore, owners and investors pay close attention to and continuously monitor the percentage of the market share.
Market share by revenue refers to the volume of income obtained by the company relative to the total revenue of the companies operating in the market or the company’s field of work. This indicator is calculated over a specific period, usually a year.
You can calculate the market share by revenue from the following equation:
Market share in terms of revenues during the period = (the company’s revenue during the same period / total market revenue during the same period) * 100
You can calculate a company’s market share by several methods, such as revenue and volume.
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