Market Penetration Strategy

What Is Market Penetration Strategy

It can also refer to the strategy a company or organization uses to expand or further saturate their customer base in a market they are already in. For example, you may develop a market penetration strategy if you are launching a new product that would appeal to a different segment of your current market.

This is all part of the Ansoff Matrix, a strategic framework developed in 1957 that helps company leaders plan for future growth. 

What is a good market penetration rate?

A good market penetration strategy all depends on what a ‘good’ market penetration rate looks like will depend on your product, industry, and your total addressable market (TAM).

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If you know your TAM, you can use this formula to calculate your current market penetration: Market Penetration Rate = (number of customers / TAM) x 100

Now, compare your rate to the average market penetration rate to see where you stand:

Average market penetration:

• Consumer products = 2 to 6%

• Business products = 10 to 40%

If your penetration rate is looking a little low, there are ways to increase it...

Ways to increase market penetration

There are a few common ways to optimize your market penetration strategy:

• Adjusting (increasing or dropping) pricing to appeal to new audiences

• Channeling further investment into marketing and advertising efforts

• Updating your product so that is better addresses customer concerns or roadblocks, and/or improving its functionality

• Acquisitions or partnerships with other companies in your space