The Unit Sales to Average Market Unit Sales metric is used by businesses to determine and track the total sales share of the industry – the data provided by this metric can help you get your business in a dominant position in the market you currently activate in.
However, in order to come up with this information, we have to understand what the market share of a company is and how to determine it, as it is the basis of the Average Market Unit Sales.
The Basics
For example, let’s take a random business/ company, be it yours or a fictional one. This business accounts for a certain value of a given market segment – and that is, in short, the market share of a company. This metric can be measured with the help of sales or volume revenues.
It’s important for a business to know its market share because this information offers the management team details about how much of the market their business controls and how much of its sales actually go to its rivals.
For example, if a business has a market share of 40% in the automotive industry this means that for every dollar that’s spent on automotive parts/ software that business brings in 40 cents.
The Formula of Unit Sales to Average Market Unit Sales
In order to come up with this metric, we’ll have to go through a couple of steps. First of all, you have to identify the total sales of the product/ product category for all of your business’ competitors and for your business as well and then sum these in order to find the exact total sales revenue that’s generated by that certain product on the market.
Keep in mind that some companies don’t make such information public and, therefore, you’ll have to estimate their total sales. As an example, we’ll assume that your first competitor stands at $8 million in sales revenue, the second one stands at $7 million, and your business stands at $5 million in sales revenue.
So, the total sales revenue for that product on the market would be of $20 million. After coming up with this sum, you’ll have to divide your business’ sales revenue by the total sales revenue of the product.
Given the information mentioned before, you have to divide your $5 million in sales revenue by $20 million – the result being 0.25.
In the end, you have to multiply the 0.25 result by 100 and you will find your business’ market share by sales revenue in form of a percentage. In our example, if you multiply 0.25 by 100 you get 25%. This means that your company accounts for 25% of the market share of the given market segment – in our case, of the automotive industry.
The Bottom Line
The Unit Sales to Average Market Unit Sales helps you know where your company stands in the market at a certain given time. Depending on the result, you’ll know if you could increase the price of your products in order to make more profit or if you can adopt a new marketing strategy in order to surpass your competitors.