Market Penetration: What it is, When it is favorable, What are its Challenges?

Market Penetration is a business development strategy in which the company takes the initiative to expand the customer base for its products and services in a specific market space. IT Market Penetration It can be both a measure and an assessment of how successful new products are or how they stand up against established competitors.

Table of Contents

Find out when the Market Penetration is favorable

Start-up market initiated by startups and businesses, in general, The first step to business growth. A successful market penetration requires careful evaluation. And perhaps the most important factor is whether it is appropriate to try to enter the time market‌ in the life cycle of the company. The answer to this question can be found by considering several related factors.

For starters, will the market share increase or decrease? If sales are declining but growth seems possible, then the market penetration may be the right path. Also, if sales are likely to remain at the same level as in previous years, the market may be worth penetration. If sales figures show an upward trend, time may be wrong.

However, if sales show an upward trend, if the trend is less dramatic than a competitor, it means that the market share is actually declining despite the increase in business. In such a situation, the market penetration will have some advantages. If the primary market for the business has additional customers that are not covered, penetration may be considered.

But if it is possible to increase sales from existing customers, then penetration may not be a good option.

Market Penetration Plan

The solid market penetration plan begins with the identification of products or services for which research is focused. It establishes the scope of the basic research project. Basic research data is usually obtained from internal archives, such as financial and business reports.

The next step is the market research process, which usually involves data collection and description, as well as compilation of competitive data for related products and/or services. Secondary competitive research is compiled from professional publications, media, and government agencies such as the SEC and the US Census Bureau.

With the results obtained from the primary and secondary research stages, it is possible to formulate a strong market penetration plan. Each business has its own characteristics and subtleties depending on the market. However, the following five steps are a good general guide to assess the potential market‌ penetration.

General Demographics – Start thinking broadly about potential customers across national censuses such as age, gender, race, and income. Try to figure out where the cracks and overlap may be. Potential customers may be limited to a specific category, income level, and/or race, and fall into the 1st generation, for example, the generation of whites who earn more than $ 70,000 per year. From now on, you can calculate the total number of leads nationwide using US Census data.

Geography becomes a very important topic as the demographics of the instant market- brand begins to focus on its market penetration plan. A new brand entering a given market has little or no interest in marketing its products nationally. There may be an immediate market statistical error in terms of population.

For example, if the local population is more racially homogeneous than the national average, or in some cases even more diverse, it is important to define a more specific target audience. Knowing a geographically common area, such as a radius, can help determine the total number of potential customers.

From this point on, the number is adjusted downwards to be more accurate, by the process of removing those who have dropped the parameters outside the target model. For example, if an instant market exists within a 20-mile radius and according to the census 100,000 people live in that radius, but if half of them belong to the wrong sex, the number of potential customers drops to about 50,000. Happens, and so on.

Range Calculation – After calculating the total size of the target market, the number of leads in the national market can be added to the number of leads in the nearest market.

Establishing Reasonable Assumptions – Dr. who is an MBA Professor at Lock Haven University. In her book, All About Business Planning: How to Plan for Success in a New or Growing Business, Marilyn Jensen states that it is reasonable to expect a market penetration Consumer production is between 2 and 6 percent, and a suitable range for commercial production is 20 40 percent.

From here, the target audience can multiply the specific number by the numbers at each end of the market penetration 2 and 6 or 20 and 40 respectively. The data obtained gives an estimated depth of market penetration. For example, if the target market is calculated for 50,000, we multiply this number by 0.02, so we multiply 50,000 by 0.06. Pair of numbers resulting from market penetration estimates of 1,000 to 3,000 customers.

Cost-Benefit Engineering – The number of customers needed to make a profit against the expected range of the market is a key element in a successful business plan. This is a simple metric to calculate. If success requires the conversion of many customers beyond the maximum penetration limit expected of the market, the chances of success in that market are slim.

Markets Penetration Challenges

Market penetration The low-risk business development strategy should generally focus on promoting marketing and sales efforts and sometimes expanding offices, interested in capturing a larger share of the existing customer base. When done well, the market penetration gives valuable returns on market share.

However, like any low-risk activity, market penetration has its limitations. For example, before entering a new market, businesses should spend time and resources evaluating their market penetration potential through the preliminary and secondary research stages described earlier.

Finally, if a new market is determined to reflect a profitable market penetration potential, the business must accept it so that the market will eventually reach a saturated position. Will go study results can also reveal an approximate timetable for this. At this point, there is no other option but to focus on developing new markets.

Penetration of a saturated market

Market Penetration Saturation One of the major limitations of the market. There is always a measurable and predictable point adopted by all customers who have a potential interest in the products and/or services provided by the new or existing business.

This is the definition of a saturated market. At this point, it is still possible to capture a large market share, thereby providing a deeper market penetration, but the cost-benefit ratio is generally unfavorable.

Achieving deep penetration in a saturated market usually involves investing in aggressive competitive marketing and advertising programs that allow competitor base customer members to transfer credibility from one brand to another. Designed to convince. In such cases, there is always a chance.

Entering a new IT market can also lead to legal issues as there are false or defamatory claims in competing advertising. Except in very rare cases, additional customers gained through these methods in a saturated market may not receive sufficient revenue to justify the investment in time, energy, creative resources, and costs.

Market Development V/S Market Penetration

Market Development is different from market to market penetration Growth in that market redefines the target market from the beginning. penetration In market strategy, the market size is a fixed number. Market development involves expanding the potential market for new customers or new applications, while the market penetration competes to capture a greater share of the established customer base.

New customers identified by market development plans may have people with similar interests and populations in different geographical areas rather than in the primary market. Or they may be potential customers who are currently in the no-buy category to provide an alternative use for the product. Market development is much easier and cheaper by expanding an existing customer mailing list by purchasing third-party mailing lists to target new customer demographics.

This may be a subtle departure from the established market penetration scheme in which potentially attractive populations are selected through new advertising programs. Or it may be as deep as adding new outlets in areas where competitors still see it as an upcoming goal. In any of these cases, the capital investment will be in the desired market expansion. Expanding into new markets is more difficult than just creating new outlets.

For example, if a cable television company provides services, the time it takes technicians to travel between customers for fuel cost, maintenance, and upkeep affects the quality, cost, and profitability of the enterprise, no matter how new the regions may be. Much less coverage or investment than making new points. In this case, the deployment of vehicle aircraft as well as maintenance facilities and personnel are required.

And, if the new market does not provide adequate returns, the capital and resource investments applicable in other cases will be wasted. Just by making new points. In this case, the deployment of vehicle aircraft as well as maintenance facilities and personnel are required.

Strategy for International Market Penetration

Entering foreign markets begins with a list of decisions that lead to conclusions about profitability. Some of these decisions include what market to enter and when, at what level, in what order, and so on. The question of which market to enter is determined by the long-term profit potential, which includes several key factors. Some of these are target audience size, personal purchasing power, job prospects, political and economic stability, and economic growth projections in the region.

Good time art

Changes in government regulations, creating a favorable environment – that is, when other foreign brands are not yet operating in this market – is a common adage that it is time to exit. Can be decided with getting Out as soon as possible. If they have already completed their analysis by establishing a strong brand identity, the initial efforts will have the unique advantage of capturing a large market share.

In addition to the benefit of market share, early departure also comes with the first benefit of having an emotional impact on a new audience. This means that by the time one is late, brand loyalty must be at full level and subsequent competitors will face a serious battle with established brands for market share.

Scale Up: The right balance

Entering large-scale up foreign markets is a major task that requires the right balance of substantial investment resources to ensure success. Decisions of this magnitude have a lasting impact on the overall profitability of the brand in all markets and are not easily changed. If the scenarios are not accurately evaluated and calculated, the results can harm the brand to competitive reaction configurations in other markets.

And in times of conflict, the flexibility to respond strategically to change may be limited or non-existent. On the other hand, small-scale entry into foreign markets may leave some flexibility and time to learn about new positions while limiting the risk of potential losses, but it is also the best way to enter the market and capture a good market share. Also limits the possibilities.