Marketing Penetration
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Marketing Penetration
Market penetration is a metric (or activity) to compute the product’s net sales amount compared to its supposed total market. In terms of market penetration vs market development, the former comes with low risk. It assists in determining and enhancing the product’s overall market share through a few insightful strategies. Also, penetration surges sales and refines brand visibility. The crucial penetration strategies constitute collaborations and procurements, penetration pricing, seasonal offers or discounts, product updates, and aggressive marketing or promotional efforts. Here is the formula to calculate the market penetration rate: Penetration Rate = (Number of consumers/Target market size) *100
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Market penetration is a quantitative measurement of the total sales volume of a product or utility in comparison to its entire estimated market. It discovers the possible market size and assists in establishing plans to boost product market share. Simply put, market penetration rate is a relevant aspect of the commercial growth procedure through pricing reduction and other approaches.
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Its advantages include better product positioning, increased sales, enhanced brand equity, and improved product visibility. Also, the penetration strategies comprise competitive pricing, reward systems, collaborations and acquisitions, and intensified outreach activities.
Market penetration involves improved product selling in the current market to secure a bigger market share Market Share Market share determines the company's contribution in percentage to the total revenue generated within an industry or market in a certain period. It depicts the company's market position when compared to that of its competitors. read more and attain more of the opponent’s clientele. Moreover, it helps evaluate the potentiality of particular goods or services and calculate their market share on a small scale.
Regarding market penetration vs market development , the former implies selling existing products in the prevailing market, while the latter means selling them in a new marketplace. Furthermore, this approach to business growth provides useful information on the market’s perception and customers regarding the product.
Needlessly, a high penetration rate is an ultimate testament to a successful business venture. It signifies that the company is an industry leader with a well-known brand name, good visibility, high sales volume, and robust brand equity. To clarify, it implies more prospects for consistent professional success and growth.
Market Penetration Rate = (Quantity of consumers/Target group size) *100
After every marketing campaign, the firm must regularly track the penetration rate to scrutinize any increment or reduction. That is to say, it will aid in analyzing the campaign’s success and accentuating the changes in penetration.
Moreover, a vital distinction concerning market penetration vs market development is that the risk level is higher in the latter strategy.
Here are some important market penetration examples :
Let’s assume that a smartphone company has launched its brand-new android phone. Its features incorporate a strong processor, 16GB RAM, 128 GB storage, and a custom-tailored personal voice assistant available in English. However, out of its target group size of 25,000, only 10,000 people have bought the smartphone till now.
Six months after the launch, the company decides to calculate its penetration rate.
Penetration Rate = (Quantity of consumers/Target group size) *100
= (10000/25000) *100
40% penetration rate is an average, but not an exceptional, outcome. So, the company decides to make some changes by partnering with a reputed electronics brand to offer 20% off on earplugs with every mobile purchase. This increases the client base by 20000. So, the penetration rate would be,
That is to say, the adoption of the right penetration approach soared the rate by 40%.
VitalHub Corporation has recently declared a magnificent boost in market penetration of its UK-based branch, Intouch with Health. Moreover, the latter registered an impressive performance in the penetration rate across the UK’s National Health Service (NHS).
As per the 2020/2021 NHS tables, Intouch possesses at least 1 module sold into 73 out of 140 Acute Trusts in England. Among almost 97,712,855 NHS outpatient consultations, the Intouch platform has processed approximately 55,170,725 (around 56.5%) of them.
It indicates the firm’s efforts for expansion by current commodities in the present marketplace. Moreover, the low-risk approach suggests how to augment and obtain market share in an advancing market with identical goods.
To clarify, let’s examine the penetration strategies:
The business may change its promotional methods and endorse aggressive advertising campaigns to grow brand awareness Brand Awareness Brand Awareness is a measure of consumer’s brand recall and brand recognition. read more . Furthermore, it helps in customer retention and gains more of its rival’s clients.
Market penetration pricing is among the crucial tactics to acquire market share and flourish the earnings, for example lowering the product amount initially to broaden audience engagement. So, the corporation must assess the impact of market share from the shifts in the product pricing schedule. It must also inspect the total recent customers received after the latest pricing scheme launch.
The business must observe the response to both its products and the opponent’s products to spot the item’s must-have key characteristics and activities. Then, to surge the market penetration rate , it can change the product and incorporate something distinctive.
An enterprise can purchase the competing business to get its client base and market share or close it down completely. Otherwise, start-up businesses may enter into a strategic partnership with similar organizations to acquire their core audience and widen their market.
Market penetration strategy is an approach to obtaining a higher product market share through capitalizing on current products in the existing marketplace. It includes price movements, aggressive marketing, increased distribution channels, product alterations, market advancement, and partnerships and acquisitions.
Market penetration pricing is a costing approach to initially provide the product or service at a low rate for increased market share. The affordable price tag attracts more eyeballs and can easily penetrate the market. It assists build the target market without bearing unreasonable expenditure. In this case, the examples comprise Gillette and Netflix.
Market penetration is a good growth strategy when the firm plans to boost the sales volume of its current goods or services in the existing marketplace. It aids them in obtaining a higher market share through penetration pricing, the introduction of product updates, and other tactics.
This has been a guide to Market Penetration and its Meaning. Here we explain the formula of market penetration rate, its strategies, pricing, and examples. You can learn more from the following articles –
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How to Calculate Your Market Penetration Rate Market Penetration vs. Market Development 6 Market Penetration Strategies Market Penetration Example
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Get to know 6 market penetration strategies and see an example
Market penetration is a ratio that indicates how successful a product or a service is in the market compared to its total estimated market. Companies use it to increase the market share of their products and services.
We use the term to outline two processes. One defines the strategy a new business implements to enter the market, and the other is for calculating the percentage of a market share a company’s product can capture. In this article, we’ll learn how to estimate the rate, make the difference between market penetration and market development clear, explore six effective strategies, and review an example.
Market penetration is an essential measurement for new companies that plan to enter the market. Calculating this ratio allows them to evaluate the industry and their potential in it and estimate their possible market share and revenue. Business owners can also leverage the formula to determine how actively customers buy their products or services compared to their total estimated market.
To calculate the rate, you need to know the number of your clients and the size of your target market. Below you can see the formula to easily estimate the ratio for your firm.
Once you obtain your penetration rate, don’t forget to constantly monitor it to see some changes. As an option, consider estimating it after you run a sales or marketing campaign . The increase or decrease will show you how successful your campaign is.
To avoid any confusion that may arise when you hear about market penetration and market development, let’s discuss these two terms in more detail.
Market penetration is a strategy that implies using a product or service in the existing market to build a larger customer base, increase market share, and be perceived as a leader. Companies can reduce prices, put more effort into promotion, and increase sales volume t o reach this objective . Brands also consider creating more convenient locations for their target market t o have a wider reach .
Market development involves creating a new product or service to satisfy the existing market. The strategy entails research and development stages and is used by companies with profound knowledge about their market. These firms are ready to bring new solutions to customers’ emerging problems.
Let’s take the automobile industry, for example. As our world changes and becomes more environmentally friendly, people’s needs change too. Conscious drivers want to have cars that don’t harm our environment. As a result, brands launch the production and introduce electric vehicles to their target audience .
The difference is clear, so the next step is to explore our list of the most successful penetration strategies.
Many businesses try to increase their penetration rates to become leaders in their industries, have access to a bigger audience, and increase their market share. For this purpose, they leverage different strategies. Let’s discover the best of them.
Now when you are acquainted with the most popular strategies, let’s proceed to an example.
Let’s imagine that there is a country with a population of 250 million people. If, for example, 50 million citizens of this country have laptops, its market penetration would be 20%. It means that there are still 200 million people (they make up 80% of the population) who don’t have laptops, so they are potential buyers for companies that sell personal portable computers. Therefore, the market penetration rate shows companies that produce laptops the potential for their growth in this country.
Simply put, our example indicates that laptop manufacturers have an excellent environment for growth since there are still a lot of people who don’t have their products yet. By calculating the rate, firms have the chance to evaluate their industry and estimate whether they will be able to meet their market share and revenue expectations.
To conclude, the measure we have discussed is essential both for startups and well-established companies. It helps assess and analyze the market and determine whether it will contribute to the achievement of goals.
Last Updated: 09.08.2022
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As soon as a company enters a new market, it strives for market penetration . The main objective behind the market penetration strategy is to launch a product , enter the market as swiftly as possible and finally, capture a sizeable market share. Market penetration is also, sometimes used as a measure to know whether a product is doing well in the market or not.
The technique of Market Penetration usually does not affect the overall marketing strategy of a company, but invariably brings a solid growth potential and an increase in revenue generation. A company trying to adopt the concepts of market penetration must remember to also implement specific plans and tactics to challenge the competitors and boost sales figures. However, it must also be considered that market penetration can be a risky affair and has some disadvantages also.
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More commonly, this technique is useful whenever a business is selling prevailing products in an ongoing market . Marketers must take into consideration the relevant market development or expansion grid data to decide actually, which penetration tactic to adopt? In other words, the market may be saturated or it may be in an intense competition scenario or the products may have low turnaround time. Now, what should be the best tactic for all of these different scenarios? Well, the answer to this question lies in the type of strategy you adopt. And yes, there are quite a few different penetration tactics to choose from. So without further ado, let’s know about a few of them.
Following are the different market penetration tactics:
The strategy of Price Adjustment is one of the most widely used market penetration tactics. A example could be lowering the price of a product or service with the aim of increasing sales is a price adjustment tactic. Furthermore, the alteration (increase or decrease) in the price of a product after analyzing the competitors’ products is also a scenario of price adjustment. But, in the real sense, this marketing strategy should be used very judiciously as overdoing it can lead to adverse results. Like, increasing your price consistently may make the customers believe that you are a company of high-profit motive. Decreasing the price too often would make them to believe that your products are of sub-standard quality.
The drastic increase in promotion of a product (or service) can lead to dramatic results. For example, advertising can be a wonderful tool for increasing brand awareness. Companies do have a choice of making their campaigns long-term or short-term which depends upon their needs and budget. However, the thing to be considered is that whatever be the size of the campaign, it must be well-planned and thought-out. An easy to counter promotional campaign would be simply ruined by competitors in this age of cut-throat competition.
The strategy of Distribution Channels is one of the most constructive market penetration strategies. This strategy typically involves opening of new distribution channels by focusing on a particular distribution channel. For example, if selling through retail outlets is your primary channel, then you can learn to gain new channels like telemarketing , e-mail marketing, online marketing , etc. Such opening of new distribution channels pave the way for more new channels and thus lead to increased market space and overall profitability.
It is true that to really appeal to your customers, you must improve your product quality . However, sometimes by communicating to them about the better standard of the product itself can do the trick and no major improvement in the product may be needed. This is because most consume
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