Market share is a critical metric that pharmaceutical and medical device companies use to gauge commercial success and enhance business profitability.
Despite its significance, many companies, particularly small and medium-sized medical device firms, do not attempt to calculate it.
Additionally, I find it surprising that many marketing professionals overlook the opportunity to leverage this metric and its components for market analysis and strategic planning.
What Is Market Share and How Is It Calculated?
Market share represents the percentage of total sales within a product category that belongs to your brand. Put simply, it compares your product’s total sales to the overall sales of the category.
The formula to calculate this critical metric is straightforward:
Market Share = (Brand Sales / Total Market Sales) × 100
How Market Share Is Used
Market share serves as a key indicator of market competitiveness, helping assess how well your product performs against competitors.
Alongside sales revenue, market share provides valuable insights into market trends—whether the industry is expanding or contracting—and customer preferences. Growth driven by overall market expansion is typically easier to achieve than growth obtained by taking market share from competitors.
Moreover, a declining market share signals potential problems that likely require marketing adjustments.
Finally, products with market shares below a certain threshold may struggle to achieve desired profitability or even long-term viability.
Challenges in Measuring Market Share
Many medical device companies lack the necessary data to accurately calculate market share. This often stems from company size or the characteristics of the market in which they operate. Larger companies or those in highly developed markets typically have access to reliable data through external providers.
Despite these limitations, I believe that attempting to calculate market share is worthwhile for making actionable business decisions—even if the data is sometimes incomplete, inaccurate, or only partially available.
To ensure an accurate market share calculation, companies must carefully define their market in terms of geographic reach, customer segments, competitors, and other relevant factors. A definition that is too broad or too narrow can lead to misleading conclusions, making this step a crucial exercise in strategic judgment.
Additionally, data inputs should be clearly defined. Using different sources or measures can yield varying results in the short term and even lead to divergent trends over time. A common example is comparing units sold versus revenue—if both metrics are available, it’s advisable to analyze both.
Finally, the timeframe of the data matters. Short-term data tends to have a high signal-to-noise ratio and may be less reliable. Conversely, long-term data offers greater stability but might fail to reflect recent market shifts.
Conclusion
Market share is a powerful indicator of market competitiveness, allowing companies to assess industry growth or decline, recognize evolving trends in customer behavior, and identify their market potential and opportunities.
By understanding it, executives can objectively evaluate the impact of key business initiatives, such as pricing strategies, customer perceptions of new products, promotional activities, and more.
Have you ever attempted to calculate your market share? Share your thoughts in the comments below. In my next post, I’ll explore the components of market share and how they can be leveraged effectively.
If you found this post valuable, feel free to share it with your network and encourage others to subscribe or follow me on LinkedIn.