Everyone wants their business to grow. This seems self-evident, given that effective and successful expansion means more income, brand exposure, brand loyalty, and more more market penetration, and we know this is true by looking at today’s most successful and well-known businesses.
The question is, what do these extremely successful businesses do to ensure that they are well-positioned for long-term growth?
Of course, depending on who you ask, there are a variety of responses to this topic. The one we’ll focus on in this RisePath blog post, though, is market penetration. What is it exactly?
The amount of a product or service sold to clients in relation to the expected total market for that product or service is known as market penetration. It’s a metric that can be used to estimate the prospective market size or build a strategy for growing a product or service’s market share.
Market Penetration Calculation
Use the method below to figure out how much a product or service is used by customers in comparison to the total expected market. To put it another way, divide the current sale volume of your product or service by the total selling volume of all similar products on the market.
Market Penetration Rate = (Number of Customers / Target Market Size) x 100
It’s critical to keep track of your market penetration on a regular basis in order to spot any spikes or losses. If you’re wondering how often you should assess this metric, a reasonable rule of thumb is to do it after each marketing and sales campaign. This will emphasise any changes in penetration, and you’ll have a better notion of your campaign’s success as a result.
Next, let’s look more closely at market penetration and why it’s such a powerful growth approach.
Market Penetration: An Overview
Market penetration can be used at the industry level to assess the potential for specific products or services, or on a smaller scale to determine a product’s market share. It provides information about how the market and your customers perceive your product or service.
What does it mean to have a high market penetration?
When it comes to this particular metric, you want to have a high percentage. There are numerous advantages to having a large market share.
When you have large market penetration…
- You’re a pioneer in your field.
- You market products or services that are well-known in the industry.
- You have a well-known brand name.
- You have excellent market visibility.
- Your brand is well-known.
- Because of the size of your organisation, you can probably create your goods for less than you could if you were a smaller company.
- You have a large sales volume, which gives you negotiating power with suppliers and sellers.
High market penetration provides a marketing advantage as well as greater opportunities for business growth and success. Thus, it is obviously the goal, but how do you get there? Market development is an excellent place to begin.
Market penetration vs. market development
You may have come across the term market development when discussing market penetration. When striving to grow market share or penetration, market development is a necessary strategy or activity – it necessitates a clear set of activities that increases the number of potential clients.
Focus on market development in the initial phase, in order to boost market entry.
Let’s take a look at the most efficient strategies to begin your market penetration plan.
Market Entry Strategies
A market penetration strategy refers to a company’s efforts to increase market share by utilising existing products in existing areas. It’s a method for a company (that already has a product on the market) to expand its business by increasing sales among existing customers.
You might hear the term “Ansoff Matrix” as you start working on your market penetration strategy.
The Ansoff Matrix is a tool that lists four different growth strategies for companies to explore.
- Market Development
- Market Penetration
- Product development
Businesses’ growth methods get riskier as they travel to the upper-right quadrant of this matrix. We included information about the Ansoff Matrix in this post because it proves and emphasises that market penetration is a highly valuable and achievable strategy to efficiently build a business, even for risk-averse people.
You may be asking what specific strategies under the umbrella of market entry you can use at your company at this stage; let’s go through some of them next.
Market Entry Methodologies
Here are some examples of successful market penetration techniques that you might concentrate on and/or execute at your firm.
1. Make a price adjustment.
Reduce or increase the price of one of your products.
2. Refresh your marketing strategy.
Rework your marketing strategy and/or timeline.
3. Determine a new product’s need and launch it.
To determine the need for a new product (or feature), survey and study your customers and target audience. Then design and sell that thing.
4. Change or update your product (or a specific feature of your product).
Update or change a product or feature to better address the concerns of your customers and buyer personas.
5. Expand into new markets and give franchise opportunities.
Determine new markets in which you may extend and build your company. Consider this: In what new locations may we open stores or prospects? To grow your brick-and-mortar firm, you may start giving franchise options.
6. Find a company partner with whom to collaborate.
In a mutually beneficial way, partner or merge with another company (e.g. run a co-marketing campaign).
7. Invest in a small business or a competitor in your field.
Consider acquiring a small business or competitor in your field if you have the resources to expand your customer base and offerings/capabilities.
8. Create a loyalty-boosting promotional campaign.
Allow customers to join a loyalty programme in exchange for providing you with their contact information and receiving benefits (e.g. discounts, birthday gifts, inside information, etc.).
9. Create a fresh marketing strategy.
Create and implement a marketing campaign or project to promote your product line in a fresh and novel approach to your customers. Analyse the success of your campaign so you can refer to it in the future.
10. Boost the activity of sales reps.
Encourage sales representatives to have more encounters with qualified leads (e.g. focus on social selling and meeting prospects where they are).
Targeting, segmentation, and positioning
STP stands for segmentation, targeting, and positioning in marketing. This is a three-step strategy for analysing your products or services and how you present them to your target market. The first step is to segment your market. Step two is to create targeted marketing campaigns for each segment. Step three is to position your company and marketing so that it appeals the most to each demographic.
Invest in Market Penetration to Improve Your Business
We just went through a few reasons why market penetration is so important for your company’s long-term success. It’s also a highly effective, low-risk growth method, as you’ve learnt throughout this blog post.
Choose the finest market penetration strategy for your goals and get started.
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