Everyone wants their business to grow. This seems pretty intuitive considering effective and successful growth means your business is experiencing boosts in revenue, brand awareness, brand loyalty, and more \u2014 and we know this to be true by looking at the most successful and well-known companies today (e.g. Apple, Amazon, etc.).<\/p>\n
The question is: What do these highly-successful companies do to ensure they put themselves in a position for strong and consistent growth?<\/em><\/p>\n <\/a> <\/p>\n Of course, there are a number of answers to this question based on who you ask. However, the one we\u2019re going to focus on in this blog post is market penetration. So, what is market penetration?<\/p>\n\n <\/a> <\/p>\n If you\u2019re using market penetration as a measurement, use the following formula to discover how much a product or service is used by customers compared to its total estimated market. In other words, take the current sale volume for your product or service and divide it by the total sale volume of all similar products available in the market.<\/p>\n (Number of Customers \/ Target Market Size) x 100 = Market Penetration Rate<\/a><\/p>\n Frequently monitoring your market penetration is important in order to identify any increases or decreases in penetration. If you\u2019re wondering how often to calculate market penetration, a good rule of thumb is to calculate it after every marketing and sales campaign you run. This will highlight any changes in penetration \u2014 and, as a result, you\u2019ll also have a better idea of the success of your campaign(s).<\/p>\n Next, let\u2019s dive a little deeper into what market penetration is and why it\u2019s such an effective growth strategy<\/a>.<\/p>\n <\/a> <\/p>\n A company can use market penetration at the industry level to review the potential for specific products or services or on a smaller scale as a way to gauge the market share of a product or service. It offers insight into how the market and your customers view your product or service.<\/p>\n When it comes to market penetration, you want yours to be high. There are many benefits to high market penetration.<\/p>\n For instance, think about Nike. The company is a market leader in athletic shoes. When you go to the sneakers section of a store like Foot Locker or Dick\u2019s Sporting Goods, Nike consistently takes up a large portion of the space.<\/p>\n That\u2019s because retailers like Foot Locker and Dick\u2019s know Nike delivers in sales. They also know their customers expect a wide selection of Nike products in their stores. Nike\u2019s popularity and brand name warrant better shelving space and visibility, too. This is all a result of Nike\u2019s high market penetration.<\/p>\n Similar to Nike, when you have a high market penetration…<\/p>\n You\u2019re an industry leader. High market penetration offers a marketing advantage and more potential for continued growth and success as a business. Needless to say, high market penetration is the goal \u2014 but, how do you achieve it? Well, market development is a good place to start.<\/p>\n\n To increase market penetration, focus on market development first. Let\u2019s look at an example.<\/p>\n A successful leggings brand, Booty by Brabants<\/a>, has made waves in recent years in the athletic-wear industry. The brand has established itself as a seller of high-quality and unique leggings for women of all sizes.<\/p>\n By reviewing their market penetration, BBB was able to identify a small, existing market they could tap into \u2014 kids’ leggings. They determined that selling kids’ leggings could help them broaden their target audience and customer base for little added cost and effort.<\/p>\n Although BBB Kids<\/a> leggings aren\u2019t a major source of revenue for the company, they\u2019re complementary to its existing product line and bring in new customers. BBB was able to identify an existing market they hadn\u2019t taken advantage of yet and determine clear steps to successfully enter that market. As a result, they expanded their product line, customer base, and market penetration.<\/p>\n Now, let\u2019s look at the most effective ways to get started on your market penetration strategy.<\/p>\n\n As you begin working on your market penetration strategy, you may hear the words: Ansoff Matrix.<\/p>\n The Ansoff Matrix<\/a> is a tool with four growth strategies listed for businesses to consider.<\/p>\n\n Image Source<\/a><\/p>\n As you move to the upper-right quadrant of this matrix, the growth strategies become riskier for businesses. We\u2019ve included information about the Ansoff Matrix in this article because it further proves and highlights the fact that market penetration is a highly-valuable and achievable way to effectively grow a business, even for the risk-averse.<\/p>\n At this point, you might be wondering about the specific strategies under the umbrella of market penetration that you can deploy at your company \u2014 let\u2019s talk about some of those next.<\/p>\n <\/a> <\/p>\n Here are some examples of effective market penetration strategies that you may choose to focus on and\/or implement at your company.<\/p>\n L<\/a>ower or raise the cost<\/a> of one of your products.<\/p>\n Rework your marketing plan<\/a> and\/or roadmap.<\/p>\n Survey and analyze your customers and target audience<\/a> to identify the need for a new product (or feature). Then, create that product and sell it.<\/p>\n Resolve the challenges of your customers<\/a> and buyer personas<\/a> more effectively by updating or changing a product or feature.<\/p>\n Identify new territories in which you can expand and grow your business. Ask yourself: Which new areas can we open our stores or prospect<\/a>? You might also begin offering franchise opportunities to expand your brick-and-mortar business.<\/p>\n Partner or merge with another business in a mutually beneficial way (e.g. run a co-marketing campaign<\/a>).<\/p>\n If you have the resources, consider acquiring a small business or competitor in your industry to broaden your base of customers and your offerings\/ capabilities. (HubSpot did this a while ago.<\/a>)<\/p>\n Give customers an opportunity to sign up for a loyalty program<\/a> that provides them with perks in return for giving you their contact information (e.g. discounts, birthday gifts, inside information, etc.).<\/p>\n Create and launch a marketing campaign<\/a> or initiative to promote your product line in a unique and new way that your customers haven\u2019t seen before. Analyze your campaign\u2019s success so you can refer to it in the future.<\/p>\n Encourage sales reps to increase the number of interactions they have with qualified prospects<\/a> (e.g. focus on social selling and meeting prospects where they are).<\/p>\n STP marketing stands for segmentation<\/a>, targeting, and positioning. This is a three-step model that helps you to examine your products or services and how you communicate them to your market. Step one is to divide your market into segments. Step two is to target each segment with tailored marketing campaigns. Step three is to position your business and marketing in a way that will appeal the most to each segment.<\/p>\n <\/a> <\/p>\n There are several examples of companies using market penetration to grow their business. For the sake of this piece, let\u2019s look at Dunkin\u2019<\/a>.<\/p>\n Dunkin\u2019 (formerly, Dunkin\u2019 Donuts) was started in Quincy, MA back in the 1940s. Since then, Dunkin\u2019 has become a globally-recognized brand. Dunkin\u2019 has since grown substantially and opened stores in 46 countries \u2014 yet, the company\u2019s most-loyal customers remain in New England. In fact, there are 12,500 Dunkin\u2019s worldwide (9,000 of which are in the U.S.) In terms of market penetration, Dunkin\u2019 continues to tap into their large and loyal market by opening and maintaining that large portion of their stores in New England.<\/p>\n Check out the following map<\/a> for example \u2014 Boston is a small city, and you can walk between almost all 10 of these Dunkin\u2019 locations in just minutes.<\/p>\n\n Image Source<\/a><\/p>\n Dunkin\u2019 knows where their customers are and that those customers want a Dunkin\u2019 store every\u2026 well, city block.<\/p>\n Not only has Dunkin\u2019 successfully penetrated their market by opening and maintaining so many stores in New England, but they\u2019ve also increased market penetration by making specific changes to their branding and menu.<\/p>\n Most notably, they changed their name from Dunkin\u2019 Donuts to Dunkin\u2019. The company does 60% of their business in coffee and other <\/a>drinks<\/a>, so the \u201cDonuts\u201d aspect of their original name was arguably a bit misleading. The CEO of Dunkin\u2019 said this move was important because the new name, \u201c… speaks to the breadth of our offerings.\u201d<\/p>\n The brand name change also gives a signal to customers that there are a number of other menu items available, aside from donuts. In fact, the name change was paired with many menu additions, including healthier options as well as offerings for non-dairy and vegan customers including their Beyond Sausage and almond milk.<\/p>\n All of these changes broadened Dunkin\u2019s customer base and target audience by accommodating more people within the market they were already penetrating.<\/p>\n We just covered several reasons why market penetration is so beneficial to your business\u2019s long-term success. And as you\u2019ve learned throughout this blog post, it\u2019s a highly effective growth strategy that\u2019s typically low-risk.<\/p>\n There are many market penetration strategies to choose from, plan, and implement at your company, so pick the best option for your goals and get started.<\/p>\nHow to Calculate Market Penetration<\/h3>\n
Understanding Market Penetration<\/h2>\n
What is high market penetration?<\/h3>\n
\n You sell products or services that are already established within the industry.
\n You have a widely-recognized brand.
\n You have good visibility in the market.
\n You have strong brand equity<\/a>.
\n You likely make your product for less than you would be able to if you were a less-established business due to the scale of your operation.
\n You have a high sales volume which means you have leverage among suppliers and sellers. <\/p>\nExample of Market Development Increasing Market Penetration<\/h4>\n
Market Penetration Strategies<\/h3>\n
1. Change your pricing.<\/h4>\n
2. Revamp your marketing.<\/h4>\n
3. Identify the need for a new product and launch it.<\/h4>\n
4. Update or change your product (or a specific feature of your product).<\/h4>\n
5. Grow business in new territories and offer franchise opportunities.<\/h4>\n
6. Identify a business partner to work with.<\/h4>\n
7. Purchase a small business or competitor in your industry.<\/h4>\n
8. Offer a promotional program to boost loyalty.<\/h4>\n
9. Develop a new marketing campaign.<\/h4>\n
10. Boost sales rep activity.<\/h4>\n
Segmentation, Targeting, and Positioning<\/h3>\n
What\u2019s an example of a successful market penetration strategy?<\/h2>\n
Invest in Market Penetration to Grow Better<\/h2>\n