Established companies and startups need to be able to innovate and create strategies that can help their business grow in order to compete in today’s digital landscape. Before you launch a new product or service it’s important to create a market penetration strategy so your company can enter a new market or niche.
Before you move forward, it’s important to first identify what stage your company is in. If you have an established business you will have more resources and a different approach. If you have a startup things can be more challenging and knowing different strategies for market penetration can put you in a much better position.
In this article we will explore different strategies for market penetration that can help your established business or startup increase sales and grow your online business. Before we move forward with the different strategies it’s first important we first define what market penetration actually means. We will also take a look into some different components of market penetration that you may have never considered.
It’s important to note that market penetration can have two different meanings. Market penetration can be either an activity or metric.
Some companies and marketing individuals chose to use both definitions in order to gain a more precise understanding behind the effectiveness of the strategies they use.
Market penetration defined as an activity is the idea of going to market with a product in an existing and proven market which has similar products or services. The idea here is to enter the market, compete and take market share from other companies.
This would be a set of activities performed by companies in order to increase their market share of a certain product or service. This is the basis behind market penetration.
Market penetration defined as a metric is finding out how much of a product or service is being sold compared to the total estimated market for that product or service.
This is typically referred to as the market penetration rate.
If you have an idea of the total market share or sales of a product or service you can calculate the market penetration rate with the following formula below.
A good market penetration rate will vary depending on the type of industry the product or service falls under. Studies have shown that the average market penetration for consumer products and services falls between 2-6%. Business products and services can range between 7 to 30%.
A good market penetration rate is typically anything over 9%. It’s worth noting that established businesses will have different standards for what a good market penetration rate is when compared to startups.
Startups can consider lower market penetration rates as being good enough while they work on scaling their businesses to the next level.
As we previously mentioned, before you create a market penetration strategy it’s important to know what stage your business is in. Below are some important questions to consider before crafting your market penetration strategy.
Answering these questions will help you gain a further understanding as to where you stand against your competitors. These questions will help you gain a more clear idea about the stage of your business and whether you are ready to penetrate a new market.
Now let's take a look at different strategies for market penetration to help you grow your online business.
As e-commerce and online shopping continues to expand, it is becoming more and more challenging to penetrate different markets online. At the same time, it’s actually becoming easier in some capacities.
Different types of sales and marketing tools are making it much easier for companies to penetrate a new market and effectively gain market share. The great part is that these sales and marketing tools are affordable for business at different scales.
Pricing is one of the main market penetration strategies which allows established businesses and startups to not only compete, but gain sizable market share. Companies who enter new markets have the ability to make an instant impression on customers if they offer competitive pricing for their products and services.
Pricing strategies can play an integral role for a company that wants to gain immediate customers and sales.
If your company has a brand new product or service which it wants to push inside a new market there are some very interesting pricing strategies which can help you grab customers attention immediately.
If you know you are inside an e-commerce market in which customers buy primarily based on the cost of a product, you have some unique pricing strategy tactics at your disposal.
These pricing strategies have the ability to help you gain immediate market share for a product or service.
They also allow you to get your business noticed by people who have never heard of you. Before you apply these pricing strategies inside your online business, it’s important you carefully analyze all pricing components used by your competitors.
An immediate way for your e-commerce business to receive more sales and market share is to amp up your marketing and promotional budgets. In order to do this effectively you need to first analyze how your ad spend is allocated throughout your marketing mix.
Once you identify all channels of your marketing mix you need to start spending more in areas where you notice higher conversions. If you have an online store you should be accurately tracking where your sales are originating from.
If you want to penetrate a market for a new product or service and you have some conversions, you need to begin scaling your marketing ad spend. The idea of scaling your advertising for your online business begins with knowing your conversions.
Let’s take a look at different ways you can scale your marketing strategy for your online business specifically with ads.
All these strategies can seriously impact your sales and business growth. It’s extremely important that you accurately track the performance of your efforts as you increase your marketing spend across different channels of your business.
If you don’t track how your increase in spending is affecting your sales you will fail to gain the necessary market share to support your ad spending.
If you have the necessary monetary resources at hand and want to expedite your way to a higher market share, acquisitions are a great way to help you get there. Acquiring an existing online business with established sales and market share is an immediate way to penetrate a market. The only caveat being that you will need a large amount of capital to do so.
Acquisitions allow you to purchase the underlying customer base, retain current sales and scale your operation as a whole. It’s a great option for online businesses who have the necessary capital and want aggressive marketing penetration.
Another option is partnering up with a company that is in a similar industry or niche as yours in order to gain market share or increase sales together. This of course will require careful due diligence from both interested parties.
Product management is an extremely important element inside a high market penetration in a targeted market. By improving the options and quality of the products and services, startups and established businesses can attract new customers and capture a share of the market.
Making changes to products which enhance its features and add value to customers can drive interest in a declining product or market.
In order to make product changes that can help you capture a share of a market you have to see where current products struggle. One way to do this online is to read reviews and common issues experienced by clients for similar products. Let’s take a look at some product changes you can make in order to drive value and interest.
These changes to products can help provide value and enhancements for customers where previous products failed. As previously mentioned, in order to do this effectively it’s important you study where your competitors products are currently struggling.
A distribution channel is a relationship between businesses and other counterparties before products and services are purchased by consumers. Expanding your distribution and sales channels is a great way to increase your sales and tap into new markets.
Different distribution and sales channels can help your online business gain awareness, new customers and expand your brand visibility. Doing this for your online business can include:
All these strategies can help you tap into markets that you may have never even considered before. They are a great way to expand organically and create demand for your product
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Although it’s easier said than done, there are some clear advantages of direct market penetration.
Just like all the advantages that successful market penetration can provide for businesses, it can also carry some disadvantages.
It’s important to note that as new online businesses innovate and push new products, they can create lower competition markets as a result of their innovation without really realising it. So, although direct market penetration creates disadvantages in some cases, it can create opportunity at the same time.