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How to Create a Market Penetration Strategy — 2021 Guide

December 11, 2021
By James Gussie

There are several strategies for market penetration, including advertising and marketing. They differ in the extent to which they lead to the desired goal. In this guide we will go over what each strategy does, how it helps you with your business goals, and who should use them.

Market penetration strategy is a marketing technique that focuses on the market in order to increase the percentage of people using your product or service. This guide will show you how to create a market penetration strategy for 2021.

If you want to establish or build a company, you’ll need a solid grasp of how to enter and flourish in your chosen market. This necessitates using the information gleaned from your market study to design a market penetration plan for your company. So, what is a market penetration strategy, and how do you go about creating one?

Table of Contents

Definition of market penetration

When compared to the expected total accessible market, market penetration refers to how much your company can sell a product or service to consumers (TAM). This is a metric that may assist you in determining the serviceable available market (SAM), or the percentage of the market that you believe you can obtain. It may also be used as a starting point for creating a plan to expand your serviceable market (SOM), or the subset of consumers you can actually acquire.

How do you figure out your market share?

Market penetration is a metric as well as a practice. You may actively participate in market penetration, which is the process of attempting to enter or grow into a certain market. The real measurement is a precise estimate of how much you expect to sell or actually sell as a proportion of the entire accessible market. The following equation may be used to calculate this value:

(Number of consumers / desired market size) x 100 Equals market penetration rate

While the action and measurement may seem to be two independent processes, your market penetration measurement may really be used to construct a market penetration plan. It may not be accurate since it is based on market size estimates, but it may still offer you with a valid statistic to compare your real outcomes to.

Consider it a starting point for determining what’s achievable and what your penetration rate has to be in order for your firm to be long-term profitable. Keeping track of this data and recording any good or negative changes may help you determine your marketing or sales campaign’s return on investment. It’s recommended to check this measurement before and after a campaign to assess performance to keep current. If you’re currently conducting campaigns with no set end date, you may also include it in your monthly plan assessment meetings.

Explanation of market penetration

To get the most out of understanding your market penetration rate, you must first comprehend what that number signifies for your company’s position in the market. What effect does your present position have on brand perception? How do you stack up against your rivals? Is there any potential for expansion? Is there a risk of new entrants?

In general, you aim to have a high market penetration. The greater market penetration you have, the more likely you are to enjoy any or all of the following market advantages:

You’re a market or industry leader.
You’ve made a name for yourself in your field.
You may take advantage of scale economies.
You have a better price position than the competition.
Your company’s brand is well-known.
You have well-established vendor connections and distribution networks.

For your firm to be viable, you don’t need to have the biggest market penetration. In reality, you’ll most likely start with a small piece of the market when you first start out. So, how can you expand your firm and expand your market share? By developing a market penetration plan based on your findings.

What is the definition of a market penetration strategy?

A market penetration strategy is a product market strategy in which a company tries to establish more control in a market where it already has a product. Through a process called as market development, a variant of this approach frequently focuses on capturing a bigger portion of an existing market.

The concrete activities you plan to take to grow your accessible market are referred to as market development. Instead of engaging with clients in your present market, you concentrate on a segment of the market that is underserved, non-buying, or new.

Let’s imagine you’re a SaaS firm that specializes in enterprise-level business email management. It’s a crowded market with well-known brands and comparable feature sets, where customer service, affordability, and convenience of use are key selling points. Instead of seeking to grab existing corporate clients from your rivals as a new entry or established organization wanting to expand, you may build another market niche.

You could notice a market for a lighter version of your software among small enterprises. Alternatively, you may offer the software to single accounting companies with the intention of expanding it out to the whole chain by concentrating on your collaborative toolset. This increases your present client base, extends the potential market, and boosts your brand equity in the business email management industry all at the same time.

What is the best way to develop a market penetration strategy?

Area expansion isn’t always achievable, therefore you’ll have to concentrate on expanding your firm by attracting clients that are currently supplied in a specific market. The Ansoff Matrix is a great place to start when building your market penetration plan. This tool will show you the several pathways you may follow to achieve your goals.

Product development and diversification are often the more expensive and risky alternatives, while market development and market penetration are considered lower-risk tactics. Within your wider market penetration plan, you’ll most likely use numerous growth tactics. However, your decision will be influenced by your present market penetration, rival positioning, and market expectations.

Start with a market study and your penetration rate before working with the Ansoff Matrix to ensure you’re ready to analyze and implement various options. Then start looking at the various market penetration tactics that are accessible to you.

Examples of market penetration strategies

Here are a few market penetration plan ideas you may try out when you complete your market study and begin to map out particular procedures.

Adjustments to the price

If you’re having trouble selling your items or services, you may want to consider lowering or raising your prices. This might help you stand out from the competition by portraying yourself as a low-cost alternative or a high-end solution. You might also consider broadening your price choices by developing multiple levels for different consumer demands, with higher tiers locking in unique features or support.

Keep in mind that any price changes may need some product development, particularly if you choose the premium route.

Introduce a new product or service to the market.

If you’re thinking of releasing a new product or service, be sure there’s a need for it first. Treat this new launch as though it were a fresh start for your company. Customers should be interviewed, market research should be conducted, revenues and costs should be forecasted, and a new product should be feasible for your company.

As previously said, this might be due to your price modification method. If this product or service is comparable to your present offerings, make sure price and marketing are clearly differentiated. If the product is complementary, look for methods to cross-promote it and increase the lifetime value of existing consumers.

Make changes to your existing goods.

Another alternative is to simply upgrade or adjust your existing goods or services. To assist specify what adjustments are required, start by establishing particular specialty categories within your target market. This might include, among other things, a new feature, lower-cost components, or distinctive versions.

The goal is to concentrate on increasing economies of scale by repurposing the essential components of a product you currently sell.

Other companies may be acquired or partnered with.

The market might be too competitive at times to get any meaningful momentum. Because of present resources and the limited client pool accessible to minor or developing rivals, one firm may be so huge and well-established that minor or rising competitors simply cannot increase their footing. In this instance, partnering with or acquiring a rival to unite your client base and resources can be a good idea.

This is also a good method for breaking into a new market. Instead of starting from the ground up, your brand will be affiliated with a well-established company.

Make changes to your marketing initiatives.

It’s possible that you won’t need to make such substantial modifications to your plan in other circumstances. Instead, you may concentrate on making the most of your present marketing budget. This might be as simple as changing the messaging in your adverts or providing fresh incentives. Or something more significant, such as relaunching marketing efforts or establishing a loyalty program.

In any case, this necessitates a detailed examination of your target audience as well as the positioning of your rivals. Is there a problem that no one seems to be addressing? Is your content and graphics failing to successfully communicate your goal or value proposition? Or maybe you’re just not investing enough in the correct marketing channels.

In any case, examine your present marketing initiatives’ return on investment and find any areas that may be improved. Start testing and laying out other plans from there, maybe based on some of the price or feature improvements we’ve previously discussed. Continue to monitor performance over time and be prepared to make minor changes if anything isn’t working.

Connect market penetration to the rest of your company plan.

It’s important to remember that market penetration shouldn’t be done in a bubble. Any plans you devise or actions you do should be aligned with your overall company strategy and aid in the achievement of specified objectives. Incorporate an assessment of your market penetration rate and any continuing tactics into your monthly plan assessments to keep this front of mind.

This will motivate you to consider financial projections, milestones, and existing methods all at the same time. If you discover that your current penetration approach isn’t supporting your bigger aims, it’s a good idea to scale down or reallocate resources until it is. It might also be a chance to tweak your company strategy to match the new opportunity you’ve discovered. You’ll never know for sure until you compare it to your strategy and financials.

Market penetration is the percentage of a market that a particular company or product has achieved. Market penetration strategies are used to increase the market share for a company’s products or services. This article will teach you how to create your own market penetration strategy, which can be used in any industry. Reference: market penetration formula.

Frequently Asked Questions

How do you develop a market penetration strategy?

A: The key to market penetration is finding an entry point, a way in. This could be as simple as driving around the neighborhood and asking neighbors if they know of any companies that need drivers. Its also helpful to do your research. Look for local businesses on Google Maps with their hours of operation and contact information, then try walking into them during their business hours armed with questions about job openings or other opportunities you think might interest them

How do you develop a marketing strategy in 2021?

A: It is important to understand the market you are targeting. This will help your organization devise a strategy that best suits them, as well as make sure they can be sold on their benefits and not just by appealing to emotions or other non-marketing factors.

What is market penetration strategy with example?

A: Market penetration strategy is a marketing term that refers to the process of expanding your product or service into new markets with different target customers.