What is Market Penetration?

What is Market Penetration?

The percentage of a product or service used by consumers compared to the expected total market for that good or service is known as Market Penetration. Market Penetration can also be used to design strategies for increasing the market share of a particular service or product. In addition, it can also be used to estimate the size of the potential market. If the entire market is large, newcomers to the business may be attracted by the possibility of gaining market share or a percentage of the total number of possible customers. For instance, if the country has 140 crore people and 56 crore of them own cell phones, then market penetration is 40% of the population. According to theory, 60% of the population, or 84 crores, are yet untapped as potential cell phone users. The penetration rates may suggest potential expansion for the manufacturers of mobile phones. In other words, Market Penetration can be used to evaluate an industry as a whole and analyze the possibility for companies inside it to obtain market share or increase revenue through sales....

What is a Marketing Penetration Strategy?

It refers to a strategy of a company or organization for expanding or further saturating its consumer base in an already established market. For instance, if a company is launching a new product that will appeal to a different segment of the existing market, it can develop a market penetration strategy. In simple words, a Market Penetration strategy is the act of introducing a new product (from the company or organization) into an already-existing market (where current or similar items already exist)....

Why is Market Penetration Important for Businesses?

Market Penetration activities help brands understand how they may grow the market share of a specific product or service in an existing market. It is an important strategy that both new and existing businesses use to reach their target audience, sell their goods, and expand their operations. Market Penetration usually requires some basic knowledge to begin with. Thus, before launching a new product, a business needs to be aware of its current market share, growth rate, pricing strategy, and competition....

Advantages of Market Penetration

1. Helps in Raising Sales: One of the primary objectives for implementing Market Penetration strategies is to increase sales. A well-implemented Market Penetration increases sales of your goods and services directly....

Disadvantages of Market Penetration

1. Faltering Brand Image: While market penetration might improve operations, it also has the potential to backfire. Companies that expand into new areas or introduce new products always run at risk of damaging their existing reputation, which can form false public opinions about them or attract customers who don’t fit with their strategic objectives. Moreover, if products lose their appeal to customers in the markets they have entered, companies may be compelled to liquidate them by selling them at a discount....

Examples of Market Penetration Strategies

The Coca-Cola Company produces the carbonated soft drink known as Coca-Cola or Coke. Coke was invented in the late nineteenth century by John Stith Pemberton and later purchased by businessman Asa Griggs Candler. With his marketing strategies, Coca-Cola became the market leader in the soft drink industry worldwide. The drink’s name relates to two of its original components, which were caffeine-containing kola nuts and coca leaves. Coca-Cola’s current recipe is still kept a trade secret....

Market Penetration Strategy

A business may grow through Market Penetration by using some of the strategies listed below:...

How to Increase Market Penetration?

Companies still use these strategies to obtain a complete understanding of their customer’s readiness to buy their products or services, even when Market Penetration sometimes faces difficulties. Greater Market Penetration suggests a more properly positioned product, a gradual increase in sales, and a rise in brand value. The four strategies listed below can help increase the market penetration of the company:...

How to Calculate Market Penetration?

The Market Penetration of a product is determined by dividing its current sales volume by the total sales volume of all items that have comparable features or meet similar demands. They also include products offered by competitors of the company. To get a percentage, the resulting figure is multiplied by 100....

Good Market Penetration Rate

The definition of a “good” market penetration rate depends upon the product, industry, and total addressable market (TAM). This is the basis of every successful Market Penetration strategy. The formula used to determine your current Market Penetration is:...

Frequently Asked Questions (FAQs)

1. What is a Marketing Penetration Strategy?...