What is market penetration strategy? Everything you need to know
Market penetration strategy is a marketing concept that focuses on increasing the number of customers who purchase or use a company's products or services. But rather than trying to cast the net further and wider, perhaps to include new territories, organisational types, or market sectors - it’s about increasing the customer base in your existing markets.
It involves identifying the best performing or profitable markets, understanding customer needs in this particular market, and how existing customers use the product or service. From here it should provide the insight needed to develop a strategy for these markets.
Market penetration is a strategic approach to increase sales and profits without necessarily increasing costs to the business. It helps companies identify their target audience and develop a plan to reach them. Market penetration provides the company with more resilience and stability that can then enable it to conquer other markets or launch new products.
In this article, we'll discuss what market penetration is in terms of business, how businesses can use it, and how it can help your business grow.
What Is Market Penetration?
Marketing is about reaching your target audience, so it makes sense that marketers should be interested in knowing how well they are doing at this task.
The term "market penetration" refers to the percentage of people who have purchased or used a product or service compared to the total estimated market for that product or service.
A high market penetration rate indicates that a company has adequately reached its target audience.
Marketing is all about getting your brand in front of as many eyes as possible. But what happens when there's too much competition for your target audience? You may find yourself with a low market penetration rate.
That's why market penetration strategy is an integral part of any marketing campaign. Using this strategy can ensure that your brand reaches as many people as possible while competing against other brands. It also allows you to tailor the messages to a distinct market segment and build wider awareness in the market.
What Is Market Penetration Strategy?
For us at Haynes MarComs, a market penetration strategy is the process of identifying and analysing opportunities to expand the existing footprint and utilisation of products and services. While also understanding the opportunity for upselling or launching new products for the defined market.
The market penetration strategy aims to identify the markets you are already in which offer the most significant opportunity for growth.
Once you've identified these markets, you'll need to develop a plan to mature your presence in them. It’s important to know the sales cycle and process that existing customers went through, to look at how to optimise to reduce the time to purchase. It also includes determining how much money you want to spend on brand marketing, promotions, events, sales and digital engagement to drive leads and awareness.
When it comes to market penetration strategy, there are two main ways to go about it:
1) Focus on a specific group of people (or niche).
2) Target multiple groups of people simultaneously.
Both approaches have advantages and disadvantages, so it depends on the situation. When it comes to B2B marketing, working with niche audiences (e.g commercial directors of UK travel companies) provides greater insight to cost of acquisition and you can target communications specifically to that audience. But it might take a lot longer to see the impact of this approach.
However, by targeting multiple audiences or the sector in a specific location, (e.g senior buyers in the UK travel sector) would give you a broader audience that would raise the awareness of the brand/company. This would potentially open doors due to spread of message through word of mouth and recommendation.
Why is market penetration important in business?
To succeed in today's competitive marketplace, you must understand the importance of market penetration. But, first, it's essential to know your target audience and determine how best to reach them.
If you do this right, you will increase your chances of success by leaps and bounds. Here are a few reasons why market penetration is essential in business:
Helps you build relationships with your target audiences and especially customers
Allows you to expand and strengthen your customer base.
Gives you insight into your competitors' strategies.
Helps you create better marketing advertising campaigns.
Makes your company more visible.
You spread your efforts less thinly
How can Companies Increase Market Penetration?
Companies can increase their market penetration by creating a unique value proposition. A unique value proposition sets your company apart from its competitors, especially by referencing the industry, the sector, the region in which you’re targeting.
You can also increase market penetration by offering a superior experience. When you provide a great user experience, you attract more customers. By being able to explain you know their specific market and their challenges with team locally available with expertise to support - the offer becomes more attractive.
Working with local commercial partners also helps, particularly if they have a strong customer base in the specific region or sector you want to grow. Identifying local media to work with and sharing stories on local customers success will really add a lot of value and credibility to your campaign.
You can also increase market penetration through word-of-mouth recommendations. People like to talk about good things they see and hear, so if you make an effort to get positive feedback, you'll likely find that your market penetration increases. This can be done really well by sponsoring events, or hosting events in partnership with other organisations.
When doing a market penetration strategy - always remember to add value.
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