What is a Market Penetration Strategy?
As we touched on above, market penetration strategies are plans that make it easiest for brands to take a new product to an already existing marketplace.
They include actionable steps as to how the company foresees getting in front of target customers and how much of the current market they expect to possibly capture.
Market penetration strategies are commonly used on forecasting how well a new flagship item or international expansion might be to the overall goals of a company.
They can also be used to determine how much of a product is being used by the total number of people who might be in a specific group, taking all suppliers into consideration.
The concept of Market Penetration
Let’s take this idea of having a market penetration strategy a step further by diving a little deeper on what the concept is.
Market penetration is simply a way of determining how many people in a demographic or target market group are buying a specific item.
The most common formula to determine market penetration rate is:
(number of customers ÷ target market size) x 100
The number of customers isn’t necessarily those who are buying from you or a specific brand, but could also be the number of people who’ve bought a similar product from all vendors.
The target market size is the total number of people within the specific demographic.
Why is it Important to Your Business?
Having a strong market penetration strategy is essential to all businesses, as it acts as an actionable guide for launching a new product in an already established marketplace.
Need an example?
Let’s say you want to launch a new brand of smartphone. Obviously, big brands like Apple and Samsung already have a huge chunk of the market share.
Your company would want to determine what the competitive market share is and come up with a goal of where you hope to be in comparison.
Then, your market penetration strategy would outline specific steps that you believe would get you there — things like running a national ad campaign or getting a celebrity influencer.
This is an overly generic example, but you probably get the idea.
Market penetration strategies are important, as they give you a road map on how to move forward with marketing your new product and staying ahead of the already established competition.
How to Create a Market Penetration Strategy
To be honest, creating a market penetration strategy isn’t always simple.
There are a lot of factors to consider and many of them are highly specific to your individual niche.
That said, there are a few steps you can take on your path to developing a successful one for your organization.
Step One: Analyze the Current Market
You can’t make decisions on how to penetrate your industry if you don’t know the status of the current market.
Thus, the first step you should take in creating a solid strategy is to analyze what’s already happening.
Start by finding as much information as you can about major players who are established in the niche.
If you can, determine their market penetration percentage and see what they’re doing to get their current results.
This is a lengthier task that can sometimes take weeks or months to accomplish.
However, the added effort is worth it, as it really gives you a clear picture moving forward as to what you should expect.
Sometimes, along the way, you’ll stumble across unexpected details about your competition—tiny things, like a quirky loyalty program or a delivery perk you never noticed from afar. These aren’t always game-changers by themselves, but paying attention to these subtle differentiators can lead to ideas you’d never spot if you stuck to just the obvious stuff. And honestly, those sometimes become the secret sauce in your own market penetration strategy—little edges, borrowed or reinvented, that help you nudge your way in.
Step Two: Decide How to Make Your Product Better Than Everyone Else’s
If you’re just entering the market with a specific product, the next thing you need to do is decide how to make what you’re offering better than that of your competitors.
This can mean using tactics like dynamic pricing, better distribution channels that make it easier to purchase, or items that offer more features or ease of use than what’s currently available.
Take into consideration the needs, wants, and desires of your target market.
- Are the items that they currently have access to truly solving their problems?
- Or are there gaps that your product could fill in?
Once you have decided how to differentiate your item from others, then you can move on to the next step.
Don’t underestimate the power of actually talking to potential customers before you get too far. Sometimes, what you think is a stellar feature just doesn’t land with the crowd you hoped to impress, or a minor tweak becomes the thing everyone raves about. User interviews and direct feedback (even the awkward, brutally honest kind) save a lot of money and headaches down the line. Nobody really likes surprises after launch—except when your initial research helps you avoid a very expensive flop. It’s not always fun, but it’s almost always worth it.
Step Three: Plan Your Marketing
Adequately understanding your ideal buyer persona is key to planning marketing as part of a market penetration strategy.
You’ll need to know what places they frequent the most and the social media platforms they use.
- Are they more receptive to traditional advertising or digital methods?
- Do they require a testimonial from a current customer?
- Or is the price level higher than they might see as valuable?
The goal here is to find methods to get their attention in a marketplace that’s already noisy with competitive chatter and offers other alternatives for purchase.
Often, this includes an omnichannel digital marketing strategy that combines both online and offline efforts.
Step Four: Launch and Track Market Penetration Data
Finally, you’ll want to launch your product and start tracking the data behind what’s happening.
The more information you know about where you stand in contrast to your competitors, the better off you’ll be.
Then you’re able to make adjustments, uncover new tactics and discover additional ways to best capture a high percentage of market share for your niche.
