What is Market Penetration Strategy? Formula and suggestions to improve.

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What is Market Penetration Strategy?

Market Penetration Strategy is the tactic used by any product development team or company to enter and capture a new market. This is applicable to an existing market where products similar to the current one already exist and the company tries to enter the market with a new product. 

Market penetration is also used as a scale to measure the percentage of the market a particular product or service is able to capture. A company can also use this strategy to expand their business or saturate the consumer base in the market.

What is an effective Market Penetration rate?

Market penetration rate measures how much of your product is used or bought by the customers in comparison to the approximate total market for that product. In order to calculate the Market penetration rate, you need to know the total addressable market (TAM). The formula is as follows: 

Market Penetration Rate = (Number of Customers / TAM) x 100

How to improve Market Penetration?

Following are a few strategies that can be used to improve Market Penetration: 

  • Use social media and digital marketing to enhance your brand awareness. 
  • Increase or decrease your rates to strike a difference as compared to your competitors.
  • Conduct a competitor analysis and emphasis on your unique selling point throughout marketing.
  • Collaborating with established brands and other companies to increase outreach. 
  • Keep on upgrading or modifying your products to fit the customer needs better. 
  • Consistency in launching new products helps to attract the customers.

FAQs

Q: Why is Market penetration important?

A: Market penetration enables customers to buy products at cost-friendly prices. Moreover, it creates brand awareness so that more and more clients know that the company exists under a particular niche. It also gives a much-awaited exposure to the company and its product.

Q: What is the formula to calculate Market Penetration rate?

A: The formula to calculate Market Penetration Rate is the Number of Customers divided by Total Addressable Market multiplied by 100. (Number of Customers / TAM) x 100.

Q: How to improve market penetration rate? 

A: You could use strategies like social media and digital marketing, fluctuating your prices, focusing on the unique selling point of your product, constantly launching new products or modifying the existing ones, and collaborating with other established brands.

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