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The key signs of an under penetrated market

Updated: Aug 21, 2022

What are some ways to identify whether or not a market has been under-penetrated?

An under-penetrated industry is one where there is little competition. It means that fewer competitors are selling similar products or services. If you want to succeed in business, you need to find an under-penetrating market.

There are several ways to identify whether a market has been under-penetrated. The best way to do this is to identify a niche that has yet to be served by other companies. A market may be underserved if the product has little competition.

This post will discuss the key signs of an under-penetrated market.

  • What Is Market Penetration?

  • What is an under-penetrated market?

  • Why is it important to know whether a market is under-penetrated?

  • How do you penetrate an existing market?

What Is Market Penetration?

Market penetration is the percentage of a product or service's market. Therefore, the goal of any business is to increase market penetration.

It can be difficult for companies to reach 100% penetration because of various factors. The most common factor is cost. A company must spend money on advertising and marketing to get more customers to buy its products or services.

However, this isn't always possible. Sometimes, a company doesn't have enough resources to advertise effectively. In other cases, a company may find itself unable to compete with larger companies in terms of pricing.

What is an under-penetrated market?

An under-penetrated industry is one where there is little competition. It means that there is a lot of room for growth. If you want to start a business, look at currently underserved industries. There are plenty of opportunities out there!

The best thing about these industries is that they usually require little capital investment. So you won't need much equipment or inventory to begin your own business.

You can also use the Internet to research potential under-penetrated industries. There are often lists of the sorts of industries that could benefit from new businesses or that are struggling compared to other sectors. It’s worth comparing data against published data, especially published by highly credible business associations.

Why is it important to know whether a market is underserved?

If you want to grow your business, you need to know what kind of market you are dealing with. In addition, it is crucial to understand whether a call is underserving so that you can make informed decisions when starting a business.

If you plan to open a restaurant, you need to consider how large the current market is. Are there already restaurants nearby? How big is the population? These questions help you decide whether it makes sense to enter the market. Apply this to any industry - hotel software - ask: how many hotels are there? How many rooms are available? What star rating are they? What systems do they currently use? What is their occupancy/profit levels like?

If you don't know anything about the market, you might waste time and money trying to sell something no one wants. Or worse yet, you might try to sell something that people don't even like!

In short, it is essential to learn about the market before entering into a business deal. By knowing what type of market you are dealing in, you can avoid making costly mistakes.

The key signs of an under-penetrated market

Several indicators show that a market is under-penetrated. Here are some key signs:

1. Low barriers to entry

It happens when there are low costs associated with getting started. For example, if you want to open a restaurant, you will probably need to invest less significant cash upfront than other businesses.

2. Small size

Small size implies that there are not many firms competing against each other. Therefore, it makes it easier for them to raise their prices.

3. Limited supply

When there is a limited supply, then there are fewer competitors. As a result, prices tend to be lower than they would otherwise be.

4. Limited number of suppliers

Suppliers are the companies that provide goods and services to consumers. If there are only a few suppliers, then it is likely that the market is underserving.

5. High price elasticity

High price elasticity refers to the fact that customers are sensitive to changes in price. When prices go down, then more people will purchase products and services.

6. High switching costs

Switching costs refer to the costs involved in changing suppliers. If switching costs are high, it will be difficult for consumers to switch between providers.

7. High transaction costs

Transaction costs refer to the costs associated with buying and selling goods and services. The higher these costs are, the less competitive the market becomes.

8. Poor quality

Poor quality means that the products or services offered by the company are not as good as those available in other markets.

9. Unfair pricing

Unfair pricing occurs when a company charges too much for its products or services. In this case, the consumer pays more than they should have.

10. Market segmentation

Market segmentation refers to dividing a market into smaller segments based on specific characteristics such as demographics, income level, etc.

11. Lack of innovation

Lack of innovation means that there isn't enough competition among businesses. As a result, consumers will often choose to use the same products and services repeatedly.

12. High levels of monopoly power

Monopoly power is when one firm has so much control over a particular market that it can set prices without fear of losing sales.

When looking at under penetrated markets, also ask yourself if your principals and values will fit the market. You need to be careful not to adapt your business model too much so that it becomes a strain on your existing business, or potentially locks you out of new markets.

Buyer power will be essential too, are they early or late adopters, what are their career motivations and ambitions, what is their spend culture, how long do they tend to stay with suppliers. All of this can massively influence your approach.

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