As a business, your primary goal is most likely to sell a lot to a lot of customers. However, that isn’t really a good goal on the surface.
Why? It doesn’t explain how you intend on getting there.
Every successful firm has what’s called a market penetration strategy.
Essentially, this plan takes into account the total number of buyers out there and how many of those sales you’re capturing versus your competitors.
In this guide, we’ll discuss why this metric is important and the reasons your business needs to have a branding plan to attract a bigger market share.
We’ll also explain how to come up with your strategy and show examples of strategies that can help your company with this process.
Ready to get started? Let’s jump right in.
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What is a Market Penetration Strategy?
As we touched on above, market penetration strategies are plans that make it easiest for brands to take a new product to an already existing marketplace.
They include actionable steps as to how the company foresees getting in front of target customers and how much of the current market they expect to possibly capture.
Market penetration strategies are commonly used on forecasting how well a new flagship item or international expansion might be to the overall goals of a company.
They can also be used to determine how much of a product is being used by the total number of people who might be in a specific group, taking all suppliers into consideration.
The concept of Market Penetration
Let’s take this idea of having a market penetration strategy a step further by diving a little deeper on what the concept is.
Market penetration is simply a way of determining how many people in a demographic or target market group are buying a specific item.
The most common formula to determine market penetration rate is:
(number of customers ÷ target market size) x 100
The number of customers isn’t necessarily those who are buying from you or a specific brand, but could also be the number of people who’ve bought a similar product from all vendors.
The target market size is the total number of people within the specific demographic.
Why is it Important to Your Business?
Having a strong market penetration strategy is essential to all businesses, as it acts as an actionable guide for launching a new product in an already established marketplace.
Need an example?
Let’s say you want to launch a new brand of smartphone. Obviously, big brands like Apple and Samsung already have a huge chunk of the market share.
Your company would want to determine what the competitive market share is and come up with a goal of where you hope to be in comparison.
Then, your market penetration strategy would outline specific steps that you believe would get you there — things like running a national ad campaign or getting a celebrity influencer.
This is an overly generic example, but you probably get the idea.
Market penetration strategies are important, as they give you a road map on how to move forward with marketing your new product and staying ahead of the already established competition.
How to Create a Market Penetration Strategy
To be honest, creating a market penetration strategy isn’t always simple.
There are a lot of factors to consider and many of them are highly specific to your individual niche.
That said, there are a few steps you can take on your path to developing a successful one for your organization.
Step One: Analyze the Current Market
You can’t make decisions on how to penetrate your industry if you don’t know the status of the current market.
Thus, the first step you should take in creating a solid strategy is to analyze what’s already happening.
Start by finding as much information as you can about major players who are established in the niche.
If you can, determine their market penetration percentage and see what they’re doing to get their current results.
This is a lengthier task that can sometimes take weeks or months to accomplish.
However, the added effort is worth it, as it really gives you a clear picture moving forward as to what you should expect.
Step Two: Decide How to Make Your Product Better Than Everyone Else’s
If you’re just entering the market with a specific product, the next thing you need to do is decide how to make what you’re offering better than that of your competitors.
This can mean using tactics like dynamic pricing, better distribution channels that make it easier to purchase, or items that offer more features or ease of use than what’s currently available.
Take into consideration the needs, wants, and desires of your target market.
- Are the items that they currently have access to truly solving their problems?
- Or are there gaps that your product could fill in?
Once you have decided how to differentiate your item from others, then you can move on to the next step.
Step Three: Plan Your Marketing
Adequately understanding your ideal buyer persona is key to planning marketing as part of a market penetration strategy.
You’ll need to know what places they frequent the most and the social media platforms they use.
- Are they more receptive to traditional advertising or digital methods?
- Do they require a testimonial from a current customer?
- Or is the price level higher than they might see as valuable?
The goal here is to find methods to get their attention in a marketplace that’s already noisy with competitive chatter and offers other alternatives for purchase.
Often, this includes an omnichannel digital marketing strategy that combines both online and offline efforts.
Step Four: Launch and Track Market Penetration Data
Finally, you’ll want to launch your product and start tracking the data behind what’s happening.
The more information you know about where you stand in contrast to your competitors, the better off you’ll be.
Then you’re able to make adjustments, uncover new tactics and discover additional ways to best capture a high percentage of market share for your niche.
Examples of Effective Strategies You Can Try
There are tons of different examples of how a solid market penetration strategy can work for your business.
Here are a few of our favorites:
If your product is having a hard time capturing a high market penetration percentage, then it might be an appropriate moment to make a few price adjustments.
If you’ve ever seen so-called “gas station wars” where one local fueling station will lower the price just a few cents under the competitor across the street, then you’ve seen this in action.
Take note of where your direct competition is selling an item and lower your cost just below theirs.
This works especially well if your company’s item has a special feature or benefit.
Focus on Customer Education
Not all companies work to educate customers on why their product is the best choice or even how that type of item solves a particular issue.
By taking the lead in your niche and creating a campaign that focuses on buyer knowledge — both general to the item and specific to your product — you’re building trust.
In the end, this can give you a better market share because customers feel they can get truthful answers and guidance from your company.
This market penetration strategy works for just about every industry but is especially great in ones with high ticket items.
Build Brand Recognition
People buy from companies that they know and trust.
Creating digital marketing campaigns that focus on brand recognition is important, as they can help work in your favor each time you launch a new item.
Furthermore, this is how most corporations grab such a high percentage of their respective market shares.
Think when Coke or Pepsi launch a new beverage — people automatically try it based on previous experiences with the brand.
Wrap Up: Why You Need a Solid Market Penetration Strategy
Creating a market penetration strategy is important for any business hoping to launch a new product in the future.
By taking these ideas into account, the strategy can be used as a road map for growth moving forward.
Ready to learn more about market penetration strategies and apply them to your business?
Get in touch with our Rock Content team for details!