Market penetration strategy
A market penetration strategy (MPS) is the act of penetrating an already existing market (in which current or similar products are already available) with a new product or service (from your company or organization).
A company’s or organization’s deployment of a plan to increase or further saturate their customer base in a market where they already operate can also be called “market saturation.”
For example, suppose you are launching a new product that would appeal to a different part of your current market. In that case, you may want to establish a market penetration strategy to achieve success. One of the marketing methods specified in the Ansoff matrix work is the market penetration strategy. Ansoff’s Matrix, a strategic framework developed in 1957 to assist business leaders in planning for future growth, incorporates all of this information into one package.
Market Share vs. Market Penetration
Simply put, “market penetration” is a term that refers to the percentage of the target audience that already uses a specific product. On the other hand, the market reflects the percentage of the market as a whole.
Why You Need a Market Penetration Strategy
Well put, PNS is crucial to all companies, as it acts as a clear, systematic, and practical plan for releasing a new product into an already existing market.
PNS helps your company understand how to perceive what is already established and expanding in the market, full of product parallels to yours. Without it, you may find it challenging to deal with well-established competitors and successfully eat into their market share.
One of the main advantages of PNS is the low risk of its carries. This makes it an excellent tool for startups to move forward into growth and prosperity, especially if the sassy startups are unwilling or unable to invest large sums of money in more long-term growth strategies.
How to Make Use of a Market Penetration Strategy
A thriving market penetration strategy is dependent on achieving a high market penetration rate. What constitutes a “high” market penetration rate will vary depending on your product, sector, and total addressable market (TAM).
Suppose you know your total addressable market (TAM). In that case, you can use the following calculation to determine your current market penetration: Market Penetration Rate = (the number of consumers divided by the total market available) multiplied by 100.
After that, you may determine where you stand by comparing your rate to the average market penetration rate:
● Market penetration, on an average
● Consumer goods account for 2 to 6% of total sales
● Business products account for 10 to 40% of total sales
You can boost your penetration rate if yours appears to be a little below average.
A few example methods for increasing market penetration include:
● There are a few popular approaches to optimizing your market penetration plan, which include the following methods:
● Changing (raising or decreasing) pricing to appeal to new customers
● Increasing the amount of money you invest in marketing and advertising efforts
● You can address customer problems or blockages more effectively by updating your product, and you can enhance its usefulness
● Acquisitions or joint ventures with other companies operating in your industry