Strategies for Market Penetration To Increase Sales and Grow Your Online Business

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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.

MARKET PENETRATION DEFINED

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 as an Activity

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.

Reading tip: Understanding the Marketing Mix

Market Penetration as a Metric

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.

Calculating 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.

What is Considered a Good Market Penetration Rate?

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.

Market Penetration Strategy 

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.

• How long has my business operated in this industry?
• How long has my average competitor been in this industry?
• What kind of sales are my competitors experiencing for similar products and services?
• Where can my product add more value than my competitors?
• How do my competitors price their products and services?
• What are common problems experienced by my competitors?

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.

Pricing Strategy 

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.

Pricing Strategy Tactics

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.

• Drop prices significantly below your competitors for a limited time
• Offer deep discounts for repeat purchases 
• Create a coupon system for you customers
• Volume based pricing for larger purchases
• Offer rewards and points
• Give away products in exchange for customer referrals

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. 

Marketing and Promotion Strategy

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.

Pro tip: 8 Inbound Marketing Strategies to grow your online presence

Ways to Increase Marketing and Promotional Spend For Your Online Business

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.

• Bid higher in CPC campaigns 
• Create more ads on different advertising platforms
• Use retargeting inside your ad campaigns
• Create an affiliate offering
• Build more marketing campaigns and advertorials
• Spread your marketing efforts to different countries
• Use press releases to get more immediate brand exposure

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. 

Acquisitions and Building Partnerships

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.

Websites such as EmpireFlippers.com, Feinternational.com, and Latonas.com give you the ability to find online businesses for sale that are in niches and industries in which you are interested in.

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. 

For SaaS businesses who are looking for a Partner Strategy and Program, we would recommend Reditus.

Making Product Changes

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. 

Reading tip: Intent driven Content: Marketing Strategy to boost your Brand and Sales

Product Changes and Improvements that Help to Penetrate a 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. 

• Create attractive packaging
• Enhance struggling features of similar products
• Develop exclusivity features for a product or service
• Make it more affordable for a wider range of customers
• Use eco friendly materials

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. 

Increase Distribution and Sales Channels

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:

• Creating new fulfillment channels
• Expanding your shipping capabilities to different countries
• Selling on different platforms like Amazon, Shopify, Ebay, Etsy
• Improving your shipping times
• Selling to local brick and mortar stores

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

Recommended tools: Solutions for Support and Sales

Advantages of Market Penetration

Although it’s easier said than done, there are some clear advantages of direct market penetration. 

• It can lead to direct sales and adoption of your product or service in the market if it’s priced correctly.
• Leads to direct brand awareness and can create customer referrals 
• It can discourage other competitors from coming into the same market because of increased competition.
• Causes the rest of the market to innovate and improve their products in order to maintain their customer base. 
• Improves competition in the marketplace and provides lower pricing for consumers

Disadvantages of Market Penetration

Just like all the advantages that successful market penetration can provide for businesses, it can also carry some disadvantages. 

• It can be quite expensive for businesses depending on the type of strategy they decide to use. 
• Lowers industry margins and revenues due to increased competition.
• Creates saturation in the market and creates cheaper alternatives for consumers. 
• It can push out smaller companies who can’t compete with lower prices.

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.