Share of Voice and Market Share are both effective measures of how your business is growing compared to your competition.
You can use them to:
Understand the competitive landscape
Set growth goals and benchmarks
Justify your marketing budget
Despite their usefulness, Share of Market and Share of Voice are often ignored, undervalued, or forgotten. Yet both metrics are worth tracking on a regular basis.
Now, let’s take a look at what each metric is, how you can track them, use cases, and considerations when using them to measure your business performance.
What is Market Share?
Market Share — or Share of Market (SoM) — is the percentage of a market’s total sales earned by one company. It’s useful to know because it gives you an indicator of how well your company is performing compared to your competitors, and you can adjust growth targets based on how your market evolves.
How do you calculate your Market Share?
To calculate it, use the simple formula:
Total business revenue / Total industry revenue = Market share
You could also calculate Market Share based on a unit basis (total units sold / total units sold in the market), but generally, total revenue is a better indicator of how much of a market a single company owns.
For example, if Company A sells 1,000,000 units at £1 per unit, they would have a total revenue of £1 million. On the other hand, Company B sells 750,000 units at £10 per unit, which could give them revenues of 75 million. Even though they sell fewer units, they have far greater revenue, and therefore greater share of the market.
What is Share of Voice?
Share of Voice (SoV) measures how much exposure your marketing and advertising is giving your company compared to your competitors.
In the past, it was only used to measure paid advertising effectiveness, but it can also be applied to other channels and methods where you compete with brands for space, such as:
Social media: how much engagement are you getting compared to competitors (use a tool like Brandwatch to track mentions)?
Website traffic: how much total traffic does your website get in comparison to the competition (use Similarweb to find competitor traffic)?
How do you calculate Share of Voice?
You can apply SoV to different channels, so the exact numbers you use will vary. However, if we were looking at digital advertising, you’d base your Share of Voice off your total impressions.
In that case, the formula is:
Total ad impressions / Total available ad impressions = Advertising SoV
Calculating your SoV across different marketing channels
If you want to calculate Share of Voice for different marketing channels, you’d swap out the ‘ad impression’ variable for a metric you care about on that channel.
For example, if you wanted to track your Share of Voice in online media, you could use the formula:
Total brand mentions in external publications / Total competition mentions in external publications = Online Media SoV
You can work out your Share of Voice for every channel that you need to.
Using Share of Voice vs Share of Search as a guiding light
Conventionally, SoV was used alongside Peckham’s Formula, which, in short, is to set your advertising budget to achieve a SoV 1.5X what you’d like your market share to be by the end of your company’s second year. Simply, by growing your SoV, you’ll grow your market share.
This was then extended by Binet & Field, who empirically proved that increasing SoV will increase market share when sustained over time.
The seemingly-complex formula is extremely simple: the more people who hear and see your brand, the more likely you are to drive more sales over time.
The problem with the traditional definition of SoV is its measurement, plus its predictive power (i.e. how well it can predict your future market share). While the original research is definitely robust, it was limited to fast moving consumer goods (FMCG).
So, is there something more useful we can use? Mark Ritson argues that now is the time to use Share of Search as a guiding light instead, replacing Share of Voice. With the merits of global access, easy comparison, affordability, and breadth (billions of searches), it eclipses the elusive SoV-based market research methodologies – which are sluggish and expensive.
Basically, the insights we desire are now available at the click of a mouse.
What can you use SoM and SoV (or Share of Search) for?
1. Benchmarking performance against competitors
The first main use case for market share and SoV/SoS is to benchmark your company performance against competitors and the market as a whole.
Firstly, market share can be used to judge your sales revenue compared to your competitors. As mentioned above, it’s better to judge this based on total revenue rather than simply total number of sales.
Using your knowledge, you can set targets to grow your market share, and continuously review how you’re performing compared to your competitors.
You can use Share of Voice to set performance targets across different marketing and acquisition channels.
For example, you could set goals to increase your Share of Voice on Google Search for keywords closely related to your business, or, have a goal to increase your social media Share of Voice by getting more followers or engagement.
2. Justifying more marketing budget
You can also use your SoV/SoS metrics to justify more marketing spend.
Whoever is in charge of marketing budgets at your company — it could be the CEO, CFO, or CMO (or a mix of them all) — wants to see real metrics to justify the budget.
For example, if you can highlight that a competitor is receiving a high SoV across their social media channels, but you currently don’t have the budget to keep up with them, you can highlight the potential opportunity if you were to increase your investment there.
When you’re creating plans for the quarter or year, you can set goals based on where you see the biggest growth opportunities.
Difficulties when measuring your SoM and SoV
1. Focusing on numbers that don’t influence new business
If you focus too heavily on SoV and SoM, you can end up focusing on optimising areas of your business that actually don’t need optimising.
For example, let’s say you run an eCommerce company, and you sell 90% of your products via Amazon. If you were comparing your SoV to competitors that only sell on their website and you used website traffic as your benchmark, you’d end up with data that makes reality look worse than it is.
Even if your competitors get more traffic, that may not make a difference, as your products are seeing traffic on Amazon. A more valuable Share of Voice measure would be looking at your total impressions on Amazon in your product category, or even media mentions of your product.
If you measure your share of voice on channels that don’t affect your business, you’ll end up setting goals that don’t make sense for your business.
2. Calculating market share in expanding industries
If your company is operating in a fast-growing industry, then calculating market share can be tricky. If you were an early entrant in the space, you’ll have a deceptively high market share at first. But, as your market rapidly expands, demand increases, and competitors emerge, your market share will shrink — even if your sales revenue and customer base is increasing.
When looking at market share, it’s always worth looking at the industry as a whole and using that context to make your decisions.
Market Share and Share of Voice: Two useful measures of your company performance
Share of Voice (or Share of Search) and Market Share are both valuable metrics, as they give you high-level insights into growth and overall company performance.
You can use Share of Voice to measure channel performance compared to your competition, and compared to your goals.
Market Share is best for looking at overall company growth, and how your business is performing compared to your goals and forecasts, and how you’re doing compared to your competitors.
Both SoV and SoM are nuanced metrics, so make sure to consider factors like the state of your market and industry, the channels you care about gaining a share of voice on, and what metrics move the needle for you.
If you can accurately measure and track your performance in both of these areas, they provide a good way to set goals and understand your company’s place in your industry.
Oren Greenberg has a proven track record for growing startups and scaleups as a strategic on-demand CMO. To speak to Oren about what you can achieve with Kurve as a growth marketing partner, get in touch today.