Market Penetration Strategy

What Is Market Penetration Strategy

Definition of Market Penetration Strategy

Put simply, a market penetration strategy is a process of infiltrating an already existing market (where current or similar products already exist) with a new product (from your company or organization).

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.

Market penetration strategy is 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?

What a ‘good’ market penetration rate looks like will depend on your product, industry, and your total addressable market (TAM).

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 increase market penetration:

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

General FAQ

What is market penetration?

Market penetration refers to the extent to which a product or service is used by customers in comparison to the total estimated market. Companies use this to measure the number of potential customers they could reach.

What is market penetration pricing?

This is a marketing strategy leveraged by businesses to attract shoppers to a new product, by offering it at a lower rate. This is intended to lure customers away from competing brands and to win more sales than similar products at a higher price point.

How to calculate the market penetration rate?

Calculating the marketing penetration rate of a product or service might seem daunting, but it may be simpler than you expect. You can calculate it by dividing the number of customers by the size of the target market and multiplying the result by 100.

What’s a good market penetration rate?

Research suggests the average marketing penetration rate ranges from 2-6% for consumer products. For business products, on the other hand, the average penetration rate is between 10- 40%.

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