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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.

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:

What is market penetration rate?

Market penetration rate is a measurement of how successful or unsuccessful a market penetration attempt is. It measures how much customers use a particular product or service. This amount is then compared against the total estimated market for that product. 

For example, let's say that your business has developed a widget. The widget market size is estimated to be 100 customers, and you have 10 widget customers. That would mean that your market penetration rate is around 10%. 

Of course, market penetration rate isn't a perfect measurement. And there are different ways to measure it, by comparing numbers of customers, market share, and so on. 

If your company increases its market penetration, what is happening?

Increased market penetration is generally a great thing for your business! It means that the total number of customers in your target market is going up. 

Or at least, it's going up in pace with the total number of customers within that market. There's always the chance that the total number of customers is decreasing while your customers remain the same, which would inflate your market penetration rate. 

In other words, an increasing market penetration rate is a good thing. Most of the time, it will be a direct result of a successful push for market penetration. 

However, it could also be a lucky side effect of some larger trend, like Zoom's explosion in users at the beginning of the pandemic. 

What is market penetration strategy?

A market penetration strategy is your company's unique approach to increasing its total market share. Market penetration strategy is usually handled by members of your marketing team and is a standard process for businesses that rely on market penetration. 

Generally speaking, market penetration strategies fall under four categories:

  1. Market development

  2. Diversification

  3. Market penetration

  4. Product development


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What Is Market Penetration Strategy

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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