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Market Penetration 2022 - Concept, Strategies & Examples

Market penetration refers to the quantity of a product or service sold to consumers in comparison to the expected total market for that product or service.

It is a metric that may be used to estimate the prospective market size or to design a plan for expanding the market share of a given product or service.

How To Calculate Market Penetration?

Market penetration is a metric as well as an action. You can actively participate in market penetration, which is your endeavor to enter or expand into a certain market. The real measurement is a particular estimate of how much you expect or do sell as a percentage of the entire accessible market. This measurement may be calculated using the following equation:

Market penetration rate = (Number of customers / target market size) x 100

While action and measurement may appear to be two distinct tasks, you may really use your market penetration measurement to construct a market penetration plan. While it may not be accurate because it is based on market size estimates, it can nevertheless give you a valid number to compare your real outcomes too.

Consider it a starting point for what's achievable and what your penetration rate has to be in order for your business to be sustainable in the long run. Keeping track of this metric and noting any positive or negative trends will help you determine the return on investment for any marketing or sales activities. To keep current, examine this measurement before and after a campaign to determine performance. If you're actively conducting campaigns with no set end date, you may also include it in your monthly plan review meetings.

What Is Market Penetration?

Market penetration has both theoretical and real meanings. On the one hand, a brand estimates market penetration to determine the size of a market and the proportion of people who buy its products and services inside it. Market penetration, in its most literal definition, refers to activities done to overcome competitors and get a bigger part of the market.

The percentage of products/services sold in relation to the expected total market is known as market penetration. In theory, a brand seeks to eliminate all competitors, capturing 100% of the market share for a certain product or service. Calculating the total market size and calculating your share of the pie is extremely beneficial for both new and established companies.

High Market Penetration

As you may expect, most brands strive for above-average or good market penetration rates. A high penetration rate yields immediate financial benefits.

Amazon has a 49 percent share of the US eCommerce market in 2018 - greater than its top three competitors combined! To put it another way, Amazon accounts for 5% of all retail dollars spent in the United States.

In the same year, iPhones were expected to have a 15% to 20% market penetration rate. Apple sold 77.3 million iPhones in the December quarter, giving them a 19.2 percent market share.

A brand with a high market penetration enjoys immediate wealth as well as an enduring reputation that may be used in the future. The true benefit, though, is taking advantage of the upward and upward momentum that has been established. Another advantage is that you may determine the pricing that your rivals must follow, rather than having to follow others.

Market Penetration Vs Market Share

Market penetration is the proportion of a certain target market that purchases a brand's products or services. It differs from market share, which is the percentage of a market's total value obtained by a brand.

Example Of Market Penetration

By the fourth quarter of 2017, Apple Inc. (AAPL) had collected a market share of more than 50% of the global smartphone market. Apple has continuously released new models of its iPhones with further innovations and upgrades, including the release of the high-end iPhone X. Apple, has a bigger market share than all of its competitors combined as a result of its market penetration.

However, the corporation still has the potential to grow its customer base by targeting the consumers of its competitors and wooing them to Apple products and services.

What Is Market Penetration Strategy?

A market penetration strategy is when a corporation attempts to increase its market share by utilizing current products in existing markets. It is the process through which a corporation (that already has a product on the market) may expand its business by boosting sales among existing customers.

As you begin to develop your market penetration plan, you may come across the term "Ansoff Matrix."

The Ansoff Matrix is a tool that lists four growth paths for companies to explore.

Ansoff Matrix
Ansoff Matrix

As you travel up and right on this matrix, firms' growth methods become riskier. We've included information on the Ansoff Matrix in this post because it further proves and emphasizes the idea that market penetration is a very beneficial and feasible strategy to efficiently build a firm, even for the most risk-averse entrepreneurs.

At this point, you may be asking about the precise market penetration techniques that you may use at your firm; let's go over some of those next.

Marketing Penetration Strategies

Alter your price. Reduce or increase the price of one of your items.

Redesign your marketing. Rethink your marketing strategy and/or roadmap.

Determine the need for a new product and then launch it. Survey and evaluate your clients and target audience to see if a new product is needed (or feature). Then, make and market that thing.

Change or update your product (or a specific feature of your product). By upgrading or altering a product or feature, you may more effectively address the concerns of your consumers and buyer personas.

Expand your business into new markets and give franchising options. Determine new markets in which you may extend and grow your firm. Consider this: In which new places can we build stores, prospect, and undertake outreach? You might also start giving franchise options to help your brick-and-mortar firm grow.

Choose a business partner with whom to collaborate. Partner with or combine with another firm in a mutually advantageous manner (e.g. run a co-marketing campaign).

Buy a tiny company or a rival in your field. Consider purchasing a small firm or rival in your field if you have the resources to increase your client base and offerings/capabilities.

To increase loyalty, offer a promotional campaign. Allow clients to join up for a loyalty program that rewards them in exchange for providing you with their contact information (e.g. discounts, birthday gifts, inside information, etc.).

Create a brand-new marketing campaign. Create and launch a marketing campaign or project to promote your product line in a novel and innovative way that your clients haven't seen before. Analyze the success of your campaign so that you can refer to it in the future.

Increase the activities of sales representatives. Encourage sales representatives to have more encounters with qualified leads (e.g. focus on social selling and meeting prospects where they are).

Final Thoughts

In terms of marketing channels, eCommerce businesses do not need to reinvent the wheel. By 2021, it is more than clear that the chance to sell items and services online exists.

However, how can e-tailers compete with giants like Amazon? The solution is to obtain a better understanding of market penetration and to build the finest marketing penetration methods to gain a greater proportion of a chosen market.

What Is Market Penetration And Market Development?

Market penetration is concerned with the sale of current items to existing markets, whereas market development is concerned with the discovery and creation of new markets for existing products. This is where market development comes into play as a beneficial tactic.

What Are The Advantages Of Market Penetration?

The benefits of market penetration techniques include rapid dispersion and adoption of your product in the marketplace, incentives to be efficient, competitive discouragement, and the production of goodwill. Lower profit margins, potential damage to your company's reputation, and the chance of a pricing war are all disadvantages.

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