Every small business aspires to grow into a Fortune 500 company one day. In fact, any business wants to keep moving forward in an incremental fashion to reach new heights. Furthermore, this is what makes the corporate world highly competitive. The ultimate goal of each business is to penetrate its market and dominate the market share in its own exemplary way. This explains why companies attach great importance to market penetration strategies.
The truth is that a business development strategy cannot exist without a market penetration strategy. A company’s market share is always a key performance indicator to measure its sophistication and authority.
Further exploration, within each industry, we identify the top performers based on market share. For example, if we talk about the smartphone industry, Samsung and Apple are the biggest players with market share. They have been competing fiercely in their quest to dominate the industry. Still, Samsung dominates the smartphone industry, putting Apple in second place thanks to some extraordinary market penetration strategies.
To confirm, in the second quarter of 2022, Samsung leads the list with a market share of 21.8. Apple is in second place with a 15.6% market share. We can attribute much of Samsung’s success to its market penetration strategy. This example clearly illustrates the need to focus on market penetration plans. However, what exactly does the term market penetration mean? Let’s find out.
What is market penetration?
Market penetration is a measure of how much share a company has in the overall market for a product. In detail, it defines how much of the product is used by consumers relative to the total estimated market size for that product. For service businesses, it will measure how much a service is being used by consumers relative to the total market size for that service.
Now, let’s also look at the definition of a market penetration strategy. This is the course of action a company takes to increase its market share in the overall market. Furthermore, market penetration is one of the four elements of the Ansoff Matrix. To explain, the Ansoff Matrix is one of the widely used strategic models used by companies. A company’s market penetration strategy is a set of strategies aimed at increasing its market share.
Let us understand with an example. Currently, Tesla has more than 70% market share in the U.S. electric vehicle market. Now, let’s say the company sets a goal of reaching 90% market share within the next three years. To do this, companies need to develop an effective market penetration strategy. The KPIs of its penetration strategy will determine whether the company meets its business objectives.
Now we know what market penetration is and what a market penetration plan is. To successfully penetrate the market, companies need a viable strategy. That’s all for this meticulous blog. The next section presents some incredible market penetration strategies.
5 business strategies for successful market entry
1. Revolutionize the way you promote
Today, marketing and promotion strategies are the main pillars on which every business grows. Statistics (vtldesign dotcom) show that big companies like Salesforce and Oracle spend 20% or more of their revenue on marketing. Furthermore, the same report confirmed that marketing ultimately contributed to the company’s 38.4% revenue growth. This brings us to the first marketing penetration strategy. In this case, you have to make sure that you need to improve your promotions.
In detail, due to technological advancement, we have huge marketing resources such as affiliate marketing, social media marketing, etc. In addition to resources, technological advancements have even completely changed the way marketing was done before. For example, technologies such as artificial intelligence (AI), VR and AR (augmented and virtual reality) also contribute to this. They assist in presenting the brand’s simple message in the most impressive form to attract more potential consumers.
So, radically changing the format of your promotions will help you increase the visibility and brand awareness of your business. This increased brand awareness will help you attract more customers. Also, this will help you gain a larger market share efficiently.
2. Enhance your business area
A business area here includes all distribution channels through which you deliver your products or services in the marketplace. Distribution channels play an important role in effectively entering the market. The mantra for success is simple, the more distribution channels you have, the more accessible your target audience will be.
Therefore, in order to penetrate your target market effectively, you need to expand your business area.For online media, you can enhance your distribution channels by
- Create a website
- Sales functions of different social media
- Partner with an e-commerce site
- Create a separate application
For offline media, you can invest in building more brick-and-mortar stores. In addition to that, you can also tap into opportunities to offer the franchise to others. Instead of handling it all at once, let other franchise partners handle it. This will help you expand your business network in terms of business partners and customers.
In this way, you will be able to utilize different distribution channels to attract more customers to your business. Hence, you will successfully gain more market share for your business.
3. Acquiring or partnering with other businesses
Jim Henson once rightly said, “When you can’t beat them, join them.” The most prominent and perfect example that fits the above quote is Facebook, now called Meta. This happened when Meta acquired its biggest rivals Instagram and Whatsapp. With that comes another huge strategy that can help you penetrate your business effectively.
In detail, when it comes to acquisitions, you can always target a competitor like Meta or acquire a small business. When you acquire any business, you automatically gain control over its existing customer base. This will ultimately increase your customer base and will help you gain more market share. Also, there is an important consideration when you are partnering with other businesses. You should always choose a business that complements your business in one way or another.
For example, recently, an Italian multinational, the Ferrero Group, or just Kinderjoy ‘Nations’, a sub-brand of Ferrero, announced an expansion in India. As it expanded, the company joined forces with the Discovery Channel. The primary purpose of this partnership is to promote their unique collection of animals to encourage children to learn about wildlife effectively. Now, since Kinderjoy is a specific product for kids, partnering with educational media can add value to both parties. In addition, it gives them the opportunity to fully exploit the partner’s target market to acquire new customers or audiences.
Therefore, both partnerships and acquisitions are great ways to break into the market. The only thing needed is to decide which form of market penetration of the two is best for your business.
4. Customer acquisition through cost leadership
According to the cost leadership strategy, companies want to develop a competitive advantage by offering products or services at the lowest price. This is the strategic advantage that companies seek to outperform their competitors. Explain that when companies offer the highest quality products at the lowest prices, they attract new customers.
In this case, companies often try to become price leaders in the market. To define, a pricing leader is the market-leading company that sets the price along with other companies that the competition follows. Businesses become price leaders by reducing profit margins and capturing the attention of customers. One of the biggest examples of effective cost leadership in the airline industry is Ryanair. The company adopts a dynamic pricing strategy to become the cost leader in the aviation industry.
However, in the race to become the cost leader, you also have to make sure you don’t let your prices go too low. This will directly affect the profitability of your business or people will doubt your quality. Furthermore, being a cost leader cannot be a long-term pricing strategy. Once you’ve gained a sizable market share, you can change your pricing strategy. Of course, its foundation is excellent customer service. Customers are even happy to pay for a premium princess when a business offers a great customer experience.
In this way, dynamic pricing will help you attract more and more customers from different social groups. This will ultimately help to collect a larger market share.
5. Embrace product diversity
Last but not least, a strategy that helps increase market penetration is product diversification. For those of you who don’t know the term, let us explain it for you. Companies diversify their products by introducing new product lines or services to gain a larger market share. The fundamental goal of diversification is to expand business profitability.
In fact, there are many examples of successful product diversification. After Disney started with cartoons, it went on to launch its own OTT platform and cruise ships. Similarly, Coca-Cola also started from carbonated beverages and entered the healthy beverage market. When businesses expand, they can open up more markets and acquire more customers.
Since diversification allows you to add more variety of products to your business. By implementing this, you will be able to easily gain the largest share of the industry. However, every diversity strategy should be accompanied by a clear change management strategy. An effective change management approach ensures better integration of transformation in the business.
However, one of the biggest challenges that can arise with product diversification is the failure to identify the potential of the target market. Therefore, the attractiveness of the target market must be corrected before investing a lot of money. This is where the analysis of the business macro and micro environment becomes critical.
In a nutshell, as the business world becomes increasingly competitive, companies often struggle to increase their market penetration. Hence, it is necessary to understand the market effectively and utilize some effective market penetration strategies to boost your business growth.
Furthermore, the above strategies will effectively help you increase your market penetration. So what are you waiting for? Take advantage of them and experience the difference for yourself.
Featured Image Credit: Gustavo Fring; Pixel; Thanks!