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