Market penetration refers to the ratio of the total number of customers who purchase a certain commodity at any given period of time to the total targeted population. It involves either increasing the current market share of an existing product or promoting a new product into an existing market. Thus, it basically encompasses all activities by a company aimed at popularizing its brand within a market with existing similar products.
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Successful market penetration is achieved when the company is able to convince and take over competitors’ clients as well as obtaining new clients for its products. Common strategies employed to achieve market penetration include, adjusting prices, promotions, product improvement advertising and increasing distribution channels.
A company can effectively increase its market share through adjusting the prices of its products in such a way that they offer slightly lower prices compared its close competitors. Low prices are meant to appeal and attract more customers who are willing to offer a lower amount for the same products.
A general assumption made here is that higher prices deter potential customers from purchasing products and the reason for lowering prices is to increase the total number of product units purchased as compared to sales from competitors (Aaker, 2012). In some rare cases, a company may decide to implement higher product prices with the view that the total revenue realized from each sold product unit which in turn generates into increased sales volume.
Increasing distribution can also aid in market penetration. This strategy is meant to ensure constant availability of products to the potential customers or clients by increasing the means through which products are availed to customers.
One such method to achieve this is through telemarketing where customers and retailers place their orders for the company’s products online via electronic mails as well as phone calls. Telemarketing can be used alongside retail selling in order to increase distribution channels. Buying more display space in retail units can also help increase product distribution since the quantity available for display subsequently increases with display space.
Promotions, advertisements and customer incentives are other strategies employed to achieve market penetration. Advertisement is the oldest and widely used strategy in market penetration and may be carried out through the media or by engaging sales representatives. It is basically carried out to create awareness about existing products being offered by the company.
Promotions are common, especially when trying to enter new markets or introducing new products. The company may opt to conduct a massive promotion campaign targeted at creating more awareness about its products as well as luring more customers to purchase its brand.
Promotions can also be short lived to run within a given time span. During this period, the company may give away small prizes to customers to further lure them into purchasing their products (Aaker, 2012). Alternatively, the company may also offer drastically reduced prices for its brands for a given time span. Promotions are not only aimed at penetrating new markets, but also to regain lost market share.
Product improvement is the latest strategy in market penetration. This is a term used to refer to utility improvement in products. Basing on the sales realized the company may opt to make certain adjustments on its products either to improve the quality or make them more appealing to the customers.
This may include creation of extra application for products, improved packaging or improved quality. Product improvement is aimed at increasing purchases after experience; customers need to first test the products before increased sales is realized.
Aaker, D. (2012). Strategic Market Management. London, UK: McGraw Hill