{"id":176005,"date":"2024-03-28T07:59:07","date_gmt":"2024-03-28T07:59:07","guid":{"rendered":"https:\/\/businessyield.com\/?p=176005"},"modified":"2024-04-02T12:45:58","modified_gmt":"2024-04-02T12:45:58","slug":"market-penetration-2","status":"publish","type":"post","link":"https:\/\/businessyield.com\/marketing\/market-penetration-2\/","title":{"rendered":"Understanding Market Penetration Strategies and How to Use It to Increase Sales","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

The premise of market penetration is simple: it is a measure of how much of a product\/service that customers actually use compared to its total estimated market. A company can use market penetration at the industry level to review the potential for specific products or services or on a smaller scale as a way to gauge the market share of a product or service. <\/p>\n\n\n\n

In a nutshell, it offers insight into how the market and your customers view your product or service. It can also be used in developing strategies employed to increase the market share of a particular product or service.<\/p>\n\n\n\n

That being said, what strategies can you employ in line with market penetration? And how can you use it to increase sales? Those are the questions I will answer in this article.<\/p>\n\n\n\n

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Key takeaways<\/p>\n\n\n\n

Market penetration defines how much of a company’s product is being sold relative to the total estimated market for that product, expressed as a percentage.<\/p>\n\n\n\n

It is also the process of going to market with a product in an existing market where current or similar products are already live and taking market share from the other competing companies.<\/p>\n\n\n\n

A market penetration strategy can help increase a brand’s customer base and revenue. <\/p>\n\n\n\n

By identifying your company’s current share of the market and comparing it to the demand, you can then create a penetration strategy. <\/p>\n\n\n\n

Understanding the different strategies and how to apply them can help increase your brand’s market share.<\/p>\n<\/blockquote>\n\n\n\n

Understanding the concept of market penetration<\/strong><\/span><\/h2>\n\n\n\n

Market penetration can be defined in two ways: either as a measurement or an activity. <\/p>\n\n\n\n

As a measurement, it defines how much of a company’s product is being sold relative to the total estimated market for that product, expressed as a percentage. This is also known as the market penetration rate.<\/p>\n\n\n\n

If you know your total addressable market (TAM), you can calculate the market penetration rate with this formula:<\/p>\n\n\n\n

Market penetration rate = (number of customers \u00f7 target market size) x 100<\/strong><\/em><\/p>\n\n\n\n

Establishing market size can be tricky depending on the nature of your SaaS product, as a potential customer base could be global and essentially target \u201ceveryone.\u201d The more granular you can get with your ideal audience demographics, the easier it will be to make this calculation.<\/p>\n\n\n\n

Read also: Saas Marketing: Overview, Plans, Agencies and Strategies (Updated)<\/a><\/strong><\/p>\n\n\n\n

As an activity, market penetration is the process of going to market with a product in an existing market in which current or similar products are already live and taking market share from the other competing companies. This is also known as a market penetration strategy.<\/p>\n\n\n\n

The term market penetration (defined as an activity) stems from the Ansoff Matrix, developed in 1957 by Igor Ansoff, which helps companies plan their strategies for future growth. The Ansoff Matrix is a 2X2 matrix representing four different business growth strategies in which a company either enters a new or existing market and with either new or existing products.<\/p>\n\n\n

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Market penetration can be used to determine the size of the potential market. If the total market is large, new entrants to the industry might be encouraged that they can gain market share or a percentage of the total number of potential customers in the industry.<\/p>\n\n\n\n

Types of market penetration strategies<\/strong><\/span><\/h2>\n\n\n\n

There are a few different types of market penetration strategies you can use with your company, including:<\/p>\n\n\n\n

Market penetration pricing<\/strong><\/h3>\n\n\n\n

Adjusting pricing is one of the most common market penetration strategies. For a company to take market share from another that already has a customer base, their product either must be of better quality or come at a lower price. This does not always mean cheaper because market penetration pricing adjustments can also include offering a new type of payment plan or providing more value for the cost. <\/p>\n\n\n\n

A common method that some brands use is to offer competitive pricing until they have a good percentage of the market share.<\/p>\n\n\n\n

Related: A Guide to Implementing Prestige Pricing Strategies for Business Owners<\/a><\/strong><\/p>\n\n\n\n

Market penetration marketing and promotions<\/strong><\/h3>\n\n\n\n

Some brands may achieve market penetration by increasing their advertising efforts or promotions. These strategies increase brand awareness, which can be important for gaining more customers and more market share. Brands can also use marketing and promotions to achieve brand loyalty or to use emotions to connect with the customer. <\/p>\n\n\n\n

Many brands may also use market penetration marketing and promotions in combination with pricing.<\/p>\n\n\n\n

See: Understanding Consumer Behavior: A Comparative Analysis between Gen Z and Millennials<\/a><\/strong><\/p>\n\n\n\n

Product updates<\/strong><\/h3>\n\n\n\n

Some brands may also decide to make updates to their product as a part of their market penetration strategy. By learning customer preferences or offering a higher quality product, brands can earn more of the market. <\/p>\n\n\n\n

Certain brands may also use new product development to achieve the same results. They can diversify their offerings and add new products to their existing inventory to attract a new type of customer.<\/p>\n\n\n\n

Acquisition<\/strong><\/h3>\n\n\n\n

Acquisition is the process of merging two entities to create a partnership<\/a>. It can also occur by buying out a competitor. With each of these actions, you combine your market share with the other brand’s share for a larger percentage of the overall market. <\/p>\n\n\n\n

Some brands may choose to maintain the previous brand’s name and reputation, whereas others may choose to merge everything into their own brand.<\/p>\n\n\n\n

Market penetration strategies<\/strong><\/span><\/h2>\n\n\n
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A market penetration strategy is when a company works towards a higher market share by tapping into existing products in existing markets. It\u2019s how a company (that already exists in the market with a product) can grow business by increasing sales among people already in the market.<\/p>\n\n\n\n

When a company tries to implement growth strategies, there are often four ways of doing so: developing new markets, diversifying into new products, penetrating existing markets, or developing new products. These four strategies are depicted in the Ansoff Matrix.<\/p>\n\n\n\n

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