Learn how to decompose market share into its three components of: penetration share, share of customer, and usage index.

1. Decomposing Market Share
Penetration Share
Share of customer (requirements)
(Heavy) Usage Index

2. Market Share Formula
Your Sales (Units or $’s)
Total Sales of all firms (Units or $’s)
Therefore, market share is just the relative
competitive position of sales
More likely to be a key goal when market shares
are known and easily measurable
Often unimportant for small firms

3. A simple market with market shares
Eddie
0 pizzas per week
Davy
3 pizzas per week
Charlie
3 pizzas per week
Billy
2 pizza per week
Abby
2 pizzas per week
TOTAL MARKET SIZE
10 pizzas per week
Pete’s Pizza
4 pizzas per week
40% market share
Paula’s Pizza
4 pizzas per week
40% market share
Pizza Pieces
2 pizzas per week
20% market share

4. Davy
1 pizzas per week
Abby
2 pizzas per week
Who buys where?
Eddie
0 pizzas per week
Davy
2 pizzas per week
Charlie
3 pizzas per week
Billy
2 pizzas per week
Pete’s Pizza
4 pizzas per week
40% market share
Paula’s Pizza
4 pizzas per week
40% market share
Pizza Pieces
2 pizzas per week
20% market share
What metrics can we
construct?

5. Davy
1 pizza per week
Abby
2 pizzas per week
Market share metrics
Market/brand penetration
Eddie
0 pizzas per week
Davy
2 pizzas per week
Charlie
3 pizzas per week
Billy
2 pizzas per week
Pete’s Pizza
4 pizzas per week
40% market share
Paula’s Pizza
4 pizzas per week
40% market share
Pizza Pieces
2 pizzas per week
20% market share
Market penetration = 80% (4/5 = active consumers)
Potential new customers “could” provide growth???
Both have 2 customers out of 5 = 40% brand penetration
(customer reach). And “penetration share” = 2/4 = 50%.
Has 1 customer out of 5 = 20%
brand penetration. And
penetration share = ¼ = 25%.
A measure of customer reach
Highlights the potential of
growing by new customers
NOTE: Because of customer sharing the
brand penetration scores add up to
more than the market penetration
• Market penetration = “active” consumers/potential consumers
• Brand penetration = customers of brand/potential consumers
• Penetration share = customers of brand/“active” consumers

6. Market share metrics
Share of customer
A measure of how well the brand/store
meets the range of needs for their
customer base  To what extent do
they need to purchase other brands?
Davy
1 pizzas per week
Abby
2 pizzas per week
Davy
2 pizzas per week
Charlie
3 pizzas per week
Billy
2 pizzas per week
Pete’s Pizza
4 pizzas per week
40% market share
Paula’s Pizza
4 pizzas per week
40% market share
Pizza Pieces
2 pizzas per week
20% market share
Abby = 2/2
100% SOC
Billy = 2/2
Davy = 2/3
Total = 4/5
= 80% SOC
Charlie = 3/3
Davy = 1/3
Total = 4/6
= 67% SOC

7. Market share metrics
Index of Usage
How does the brand’s customer’s
average sales compare to the market
average? (More heavy or light users?)
Davy
1 pizzas per week
Abby
2 pizzas per week
Davy
2 pizzas per week
Charlie
3 pizzas per week
Billy
2 pizzas per week
Pete’s Pizza
4 pizzas per week
40% market share
Paula’s Pizza
4 pizzas per week
40% market share
Pizza Pieces
2 pizzas per week
20% market share
Abby = 2
Average = 2
Index = 2/2.5 = 0.8
Billy = 2
Davy = 3
Average = 2.5
Index = 1
Charlie = 3
Davy = 3
Average = 3
Index = 3/2.5 = 1.2
Average usage = 10 sales
to 4 customers = 2.5

8. Market share metrics
Three components
Decomposing market share into three
components helps identify the
opportunities for market share growth
Pete’s Pizza
4 pizzas per week
40% market share
Paula’s Pizza
4 pizzas per week
40% market share
Pizza Pieces
2 pizzas per week
20% market share
Index = 0.8Index = 1 Index = 1.2
Penetration share =
50%
Penetration share =
50%
Penetration share =
25%
100% SOC80% SOC 67% SOC
50% X 80% X 1 = 40% 50% X 67% X 1.2 = 40% 25% X 100% X 0.8 = 20%
Where should each pizza store target?

9. Components of Market Share
Market share
Share of customers
= penetration share
(%brand/%active)
Get NEW customers
Heavy or light users
(level of use index)
Target heavy users
Share of customer
(share of sales)
Target EXISTING
customers

10. www.marketingstudyguide.com
Geoff Fripp
Marketing lecturer and textbook
author