Market penetration is one of the four main business growth strategies. It involves focusing on selling your existing products or services into your existing markets, with the aim of increasing your market share.
Most businesses will at some point consider this strategy since, according to the Ansoff matrix, it carries the lowest amount of risk. It can be especially helpful in the early stages of starting up.
Market penetration tactics
To devise a good market penetration strategy, you must have a successful product and a detailed knowledge of your market. You must also thoroughly understand your competitors.
You can usually achieve market penetration in four ways. You can:
- increase the market share of current products
- increase usage by existing customers
- dominate growth markets
- drive out competitors from a saturated market
Different tactics can help you to increase the market share of existing products, including:
- price adjustments
- sale promotions
- targeted advertising
- opening of new distribution channels, such as online sales
You can also segment your customers to identify a new demographic for your product, eg a different age group. Businesses often rely on advertising and marketing to attract and sell to specific demographic groups in their markets.
If your market is saturated, you may need to find another approach to drive out competitors. For example, raising or lowering your prices and heavily promoting your products can help make the market unattractive or inaccessible for smaller competitors.
If you can compete on price and offering, you may look at ways of increasing usage by existing customers. You can introduce, for example, loyalty schemes or add value to the existing product or service to encourage more frequent use, and retain and grow your customer base.
Market penetration strategy isn't going to work for all products and all types of businesses. You may need to use different strategies to achieve and sustain growth. Read about other business growth strategies, including:
How to measure market penetration
Understanding your market penetration can help you measure how your product is doing in the market, and how customers view it in comparison to a competing product or service.
As a metric, market penetration is expressed as a percentage. You can calculate it by multiplying the current sales volume by 100 and dividing that amount by the total sales volume of all similar products, including those sold by competitors.
See how to measure performance and set targets.
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