Penetration Index
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Penetration Index
Marketing Metrics: Understanding Market Share and Related Metrics
By David J. Reibstein , Neil T. Bendle , Paul W. Farris , Phillip E. Pfeifer
May 26, 2006
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Penetration
is a measure of brand or category
popularity. It is defined as the
number of people who buy a specific
brand or a category of goods at
least once in a given period,
divided by the size of the relevant
market population.
Market
Penetration (%) = Customers
Who Have Purchased a Product
in the Category (#)/Total Population
(#)
Brand
Penetration (%) = Customers
Who Have Purchased the Brand
(#)/Total Population (#)
Penetration
Share (%) = Brand Penetration
(%)/Market Penetration (%)
Penetration
Share (%) = Customers Who Have
Purchased the Brand (#)/Customers
Who Have Purchased a Product
in the Category (#)
Often,
managers
must
decide
whether
to
seek
sales
growth
by
acquiring
existing
category
users
from
their
competitors
or
by
expanding
the
total
population
of
category
users,
attracting
new
customers
to
the
market.
Penetration
metrics
help
indicate
which
of
these
strategies
would
be
most
appropriate
and
help
managers
to
monitor
their
success.
These
equations
might
also
be
calculated
for
usage
instead
of
purchase.
Penetration: The
proportion
of
people
in
the
target
who
bought
(at
least
once
in
the
period)
a
specific
brand
or
a
category
of
goods.
Market
Penetration (%) = Customers Who
Have Purchased a Product in the
Category (#)/Total Population
(#)
Brand
Penetration (%) = Customers Who
Have Purchased the Brand (#)/Total
Population (#)
Two
key
measures
of a
product's "popularity" are
penetration
rate
and
penetration
share.
The
penetration
rate
(also
called
penetration,
brand
penetration,
or market
penetration
as appropriate),
is the
percentage
of the
relevant
population
that
has
purchased
a given
brand
or category
at least
once
in the
time
period
under
study.
Example: Over
a period
of a
month,
in a
market
of 10,000
households,
500
households
purchased
Big
Bomb
brand
flea
foggers.
Brand
Penetration,
Big
Bomb
=
Big
Bomb
Customers/Total
Population
=500/10,000=
5
5%
A brand's
penetration
share,
in contrast
to penetration
rate,
is determined
by comparing
that
brand's
customer
population
to the
number
of customers for
its
category in
the
relevant
market
as a
whole.
Here
again,
to be
considered
a customer,
one
must
have
purchased
the
brand
or category
at least
once
during
the
period.
Penetration
Share (%) = Brand Penetration
(%)/Market Penetration (%)
Example: Returning
to the
flea
fogger
market,
during
the
month
in which
500
households
purchased
Big
Bomb,
2,000
households
bought
at least
one
product
of any
brand
in this
category.
This
enables
us to
calculate
Big
Bomb's
penetration
share.
Penetration
Share,
Big
Bomb
=
Big
Bomb
Customers/Category
Customers
=500/20,000=
5
25%
Relationship
of
Penetration
Share
to
Market
Share: Market
share
can
be
calculated
as
the
product
of
three
components:
penetration
share,
share
of
requirements,
and
heavy
usage
index.
Market
Share (%) = Penetration Share
(%) * Share of Requirements (%)
* Heavy Usage Index (I)
Share
of
Requirements: The
percentage
of
customers' needs
in
a
category
that
are
served
by
a
given
brand
or
product
(see
Section
2.5).
Heavy
Usage
Index: A
measure
of
how
heavily
the
people
who
use
a
specific
product
use
the
entire
category
of
such
products
(see
Section
2.6).
In
light
of these
relationships,
managers
can
use
this
decomposition
of market
share
to reveal
penetration
share,
given
the
other
inputs.
Penetration
Share (%) = Market Share (%)/[Heavy
Usage Index (I) * Share of Requirements
(%)]
Example: Eat
Wheats
brand
cereal
has
a market
share
in Urbanopolis
of 6%.
The
heavy
usage
index
for
Eat
Wheats
cereal
is 0.75
in Urbanopolis.
Its
share
of requirements
is 40%.
From
these
data,
we can
calculate
the
penetration
share
for
Eat
Wheats
brand
cereal
in Urbanopolis:
Penetration
Share
=
Market
Share/(Heavy
Usage
Index
*
Share
of
Requirements)
=
6%/(0.75
*
40%)=6%/.30
5
20%
The
time
period
over
which
a firm
measures
penetration
can
have
a significant
impact
on the
penetration
rate.
For
example,
even
among
the
most
popular
detergent
brands,
many
are
not
purchased
weekly.
As the
time
period
used
to define
penetration
becomes
shorter,
managers
can
expect
penetration
rates
to decline.
By contrast,
penetration
share
may
be less
subject
to this
dynamic
because
it represents
a comparison
between
brands,
among
which
the
effects
of shorter
periods
may
fall
approximately
evenly.
Total
Number of Active Customers: The
customers (accounts) who purchased
at least once in a given time
period. When assessed at a brand
level, this is equivalent to brand
penetration. This term is often
used in shorthand form––total
number of customers––though
this would not be appropriate
when a distinction must be made
for ex-customers. This is discussed
in more detail in Section 5.1
(customers of a specified recency).
Acceptors: Customers
who
are
disposed
to
accept
a
given
product
and
its
benefits:
the
opposite
of
rejecters.
Ever-tried: The
percentage
of
a
population
that
has
tried
a
given
brand
at
any
time.
(See
Section
4.1
for
more
on
trial.)
How to Determine the Penetration Rate for a Business - Chron.com
Penetration | Marketing Metrics: Understanding Market Share... | InformIT
MPI - Market Penetration Index Definition / Meaning
penetration index - это... Что такое penetration index ?
Market Penetration : Techniques, Advantages and Disadvantages
Home / MPI – Market Penetration Index
By Patrick Landman | 2020-08-03T14:35:46+00:00 April 10th, 2020 | Comments Off on MPI – Market Penetration Index
As CEO and Founder of Xotels, Patrick Landman has made it his mission to turn independent hotels and resorts into local market leaders. Xotels´ diverse expertise and deep-knowledge across hotel management , hotel operator , asset management , hotel consulting , and revenue management services , enables them to drive results for independent boutique hotels, luxury eco-resorts, and innovative lodging concepts. Below you will find opinion articles written by Patrick Landman.
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