Dollar Market Share - Definition, Importance & Example
What is Dollar Market Share?
Dollar market share can be calculated by dividing the dollar revenue earned from a product by the total dollar sales including its competitors in that segment. Dollar market share is calculated by dividing the number of dollars earned by product sales by the total dollars earned by sales of units in the segment. Dollar market share gives the financial health of the company in the industry compared to competitors.
Importance of Dollar Market Share
Market share can be calculated on different bases, such as the number of units sold, or the share of dollar volume of the market. The market share is a marketing metric which indicates the percentage of the market that has been captured by a particular product or brand. Companies also use metrics like relative market share to compare their performance as compared to other competitors in the market.
Dollar market share can be used as an indicator to understand the financial performance of a firm. It shows where the company stands, relative to its peers or competitors. If the total dollar market size grows and the company maintains the same market share relative to its peers, it implies that the dollars earned from the product are also increasing.
Since dollar market share is a relation between a companies dollar sales and between that of the total market dollar sales, there are different ways in which it can be impacted. If a company improves its business & sales, and earns more, then the overall dollar market share would increase. However, in a scenario where the industry business increases and the companies business remains same, it would lead to a decline of the dollar market share. Hence, it is important for companies to constantly monitor, review and evaluate the dollar market share and devise strategies to increase the same.
Example of Dollar Market Share
For example, if the total dollar sales from a particular brand of biscuit, say X, is $200,000, and the total dollar sales of biscuits in general is $2,000,000, this implies that:
Dollar market share of X is $200000/$2000000 = 10%
In the same example, if suppose the overall market remains same, and the company's business increases to $300,000, then the dollar market share increases to:
$300000 / $2000000 = 15%
Hence dollar market share is a function of a company's performance as well as the performance of the industry & market.
Hence, this concludes the definition of Dollar Market Share along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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