Every business owner comes across the word ‘market penetration’. It can hold different meanings in different contexts. It is essential to know what it means and how you can create a market penetration strategy.
Keep on reading to learn more about market penetration and how to use it as a measurement.
Market penetration can have two meanings. It can be both market penetration rate and market penetration strategy. The former is measured as a percentage and the latter is performed as a business activity to grow your market share.
If you are a distributor and there are 100 retailers in your service area. You have 30 recurring retailers who buy goods from you. Then you have a 30% penetration rate.
Market penetration can also be viewed as an activity that is performed to increase your market share.
When you use market penetration as measurement, it is calculated as penetration rate. Penetration rate tells you how much of your products/services the customers are using with respect to the total market size. It shows you an insight about where your business stands in the market as compared to your competitors.
(Number of Customers / Target Market Size) x 100 = Penetration Rate
You can measure penetration rate after each quarter, year or every sales campaign. It will show the results of your efforts done towards market penetration and the scope of improvement.
Why is market penetration so important? Let’s find out. These are the main reasons why every business no matter how big or small should focus on preparing a market penetration strategy.
Market penetration is crucial to acquire more customers, sell more products, and expand a business. It helps to increase sales which means more revenue for the business.
Market penetration boosts adoption of your product by your target customers. You acquire more and more customers eventually increasing your market share & understanding your market deeply.
You discover new areas for business while looking for penetration opportunities. New product/service ideas and changes in current product also come forward. These types of new opportunities help in the growth of business.
A market penetration strategy is simply a plan to gain a higher market share in the market. It states the things you need to do to increase your sales and eventually your market share.
Here are few things that you can include in your market penetration strategy:
These were some ways in which you can acquire more share in the market. Do apply them and tweak them in your own unique ways that work best for you.