If you are a marketer, you are probably already keeping track of what your market share is. It is an important metric after all. However, when it comes to decision making with regards to marketing, merely knowing your market share might not always be enough. It is equally important to know what your market share is in the context of the other players in the category. And at the same time, if you are trying to plot the BCG matrix or the Benin companies, RMS chart or the marketing role matrix, in all of these cases, knowing what your share is in the context of the other players in the category, as well as knowing the growth rates of the different players in the category becomes important. And that is why in today's video, I will be talking about relative market share, which is important ingredient to be able to do any of these calculations. And at the same time, knowing how your brand is performing with relation to the other competitors in the category. The world of marketing is vast, complex and rapidly evolving. But with just a bit of help, it can be a lot of fun. On this channel, I simplify real world marketing for all the curious minds out there. Hi, I'm Rahul and this is the Business of Marketing. If you are new to this channel, I recommend that you hit the subscribe button and also click on the bell icon so that you are notified every time I make a new video. And if you have any thoughts or comments, please drop them in the comment section below. Let's start by understanding what exactly is relative market share. Relative market share or RMS is a measure to evaluate a brand's market share in context of the market share of its competitors. This is done by measuring how a brand is performing relative to its biggest competitor. To understand why relative market share is important, I will show three different scenarios of categories and how the brands are placed within the category. So once you see that it will be pretty obvious as to why you need to understand this concept. In the first scenario, you see that there are seven different brands in this category. And brand A is a dominating market leader which has a market share of pretty much more than twice of any other competitors in the market. Looking at this chart, it would not be wrong to guess that brand A is probably calling the shots as far as this category is concerned. Now, let's look at the second scenario. In this scenario, there are four different competitors with brand A at 35% whereas brand B and C are closely following at 30 and 28% and brand D is a really small player at 7% market share. In this scenario, by brand A with 35% is still the market leader. It is closely followed by B and C and it would not be wrong to guess that there is stiff competition going on between the bigger brands in the category with the possibility of any one of them taking over the others and becoming a market leader at any point in time. And in the third scenario, we see that there are four different brands with brand A also having 35% market share in this case. However, there is another competitor which is brand B which has a significantly higher market share at 50%. In this scenario, it would not be wrong to assume that brand A would be focusing its efforts on winning market share from competition if the category is mature. Or it would be focusing on growing the category if it has very very low penetration. So with the help of these three examples, I really wanted to highlight how brand A with the same absolute market share of 35% has very different role and focus when it comes to its marketing efforts because of the realities on the ground. And this is why knowing the relative market share of brand A becomes extremely crucial. So now let's understand how do you go about calculating the relative market share. The relative market share of a brand is equal to that brand's market share divided by the market share of the biggest competitor that exists in the category. Relative market share needs to be calculated for every individual brand separately. Let's go back to scenario number two which I had shared earlier to try and understand how relative market share for every single brand in the category is calculated. Now in scenario number two, if you remember we had four different brands A, B, C, and D with brand A being the market leader which is closely followed by brand B and C at 30 and 28% market share respectively. And you have brand D at a 7% market share. In this chart, you can see how the relative market share of the four different brands are being calculated. For example, if you want to calculate the relative market share of brand A, you take the market share of brand A which is 35 and divided by the largest competitor it has in the category which is brand B at 30% market share. And then what you get is 1.17 as the relative market share of brand A. As you move from the calculation of relative market share for brand A to brand B, C, and D, you see that the denominator is always the same and that is the market share of brand A. That is because of the fact that brand A is the largest competitor for all the three other brands in the category. And if you look closely at the relative market share column, you will notice that there is always only one brand which has the relative market share of more than one. Everyone else has a relative market share of less than one. And when the RMS is more than one, you understand it's the market leaders RMS. There are primarily three questions that relative market share will help you answer. The first one is it tells you whether your brand is a market leader or not. Secondly, how big is the gap between your brand and the biggest brand in your competitive set? And thirdly, it helps you understand the nature of competition and therefore the degree of influence a brand might have within the category. And while knowing relative market share is important by itself, as I mentioned in the beginning of this video, knowing relative market share is an important ingredient to making other calculations like the PCG matrix or the BNN companies, RMS chart or the marketing role matrix. In the near future, I will be making videos covering all of these topics as well. And that brings me to the end of today's video. I hope you liked what I shared and if you did, please hit the like button. And if you haven't already subscribed to my channel, please hit the subscribe button and click on the bell icon now. If there are any thoughts or comments that you would want to share with me, please drop them in the comment section below. And thank you very much for watching the business of marketing. I'll see you soon in my next video.