Every small business aspires to grow as big as a Fortune 500 company one fine day. In fact, any business would want to keep advancing in an incremental way to scale new heights. Besides, this is what makes the enterprise world highly competitive. The ultimate objective of every business is to penetrate its market to dominate the market share in its own exemplary way. This explains why businesses lay great emphasis on market penetration strategies.
The fact of the matter is that business advancement strategies cannot exist without market penetration tactics. The market share of a company will always be a key performance indicator of its advancement and authority.
Probing further, in every industry, we identify the top performers in terms of their market share. For instance, if we talk about the smartphone industry, Samsung and Apple are the biggest players with dominating market shares. They have always had fierce competition in dominating the industry. Still, due to some extraordinary market penetration strategies, Samsung dominated the smartphone industry by leaving Apple in the second spot.
To substantiate, in the second quarter of 2022, Samsung made it to the top spot with a market share of 21.8. Whereas Apple bagged the second position with a market share of 15.6%. We can largely attribute the success of Samsung to its market penetration strategies. This example makes a clear case for paying heed to the need for a firm market penetration plan. However, what does the term market penetration exactly imply? Let us find out.
What is market penetration?
Market penetration is a measure of how much share a company holds in the overall market for a product. To elaborate, it defines how much a product is used by consumers relative to the total estimated market size for that product. For service businesses, it will be a measure of how much a service is used by consumers relative to the total market size for that service.
Now, let us also look at the definition of market penetration strategies. It is the course of action that a company initiates to increase its market share in the overall market. Besides, market penetration is one of the four elements of the Ansoff Matrix. To explain, Ansoff Matrix is one of the widely applied strategic models used by companies. A company’s market penetration strategy is the set of tactics aimed at increasing its market share.
Let us understand the same through an example. Currently, Tesla has over 70 percent market share in the US EV market. Now, let’s say the company sets a target for attaining a market share of 90 percent in the next three years. For that, the company will need to frame an effective market penetration strategy. The KPIs of its penetration strategy will determine whether the company meets its business objectives.
Now we know all about what market penetration is and what is a market penetration plan. For successful market penetration, companies need actionable strategies. This is what this meticulous blog is all about. The next section puts forth some incredible strategies for market penetration.
5 Business Strategies For Successful Market Penetration
1. Revolutionize Your Promotional Practices
Marketing and promotional strategies have nowadays become a major pillar on which the growth of every business majorly depends. Statistical data (vtldesign dotcom) states that big names like Salesforce and Oracle dedicate 20% or even more of revenue to marketing. Besides, the same reports validate that marketing is eventually responsible for generating companies’ revenue growth of 38.4%. This brings us to the very first marketing penetration strategy. In this, you have to ensure that you need to revamp your promotional practices.
To elaborate, thanks to technological advancements, we have tremendous marketing sources like affiliate marketing, social media marketing, and so on. Apart from the sources, technological advancements even revolutionized the way marketing was done before. For example, technologies like artificial intelligence (AI), VR, and AR (augmented and virtual reality), have also contributed to the same. They have assisted in presenting even simple messages of brands in the most impressive form to attract more potential consumers.
Hence, revolutionizing the form of promotional practices will assist you in enhancing the awareness and brand visibility of your business. This greater brand awareness will assist you in attracting more customers. Besides, this will assist you in acquiring a bigger share of the market effectively.
2. Enhance Your Business Territories
Business territories here include all of your distribution channels through which you deliver your product or service in the market. Distribution channels play a major role in penetrating the market effectively. The success mantra is simple, the more distribution channels you have, the more accessible you are to your target audience.
Hence, in order to effectively penetrate your target market, you need to enhance the territories of your business. For online mediums, you can enhance the distribution channels by
- Creating websites
- Selling features of different social media
- Collaborating with e-commerce websites
- Creating separate apps
For offline mediums, you can invest in building up more brick-and-mortar stores. Other than that, you can also dig out the opportunities to give the franchises to other people. Rather than handling it all at once yourself, you can let your other franchise partners handle it. This will assist you in expanding your business networks in terms of your business partners as well as your customers.
This way, you will be able to take advantage of different distribution channels to get more customers to your business. Hence, you will get successful in acquiring more market share for your business.
3. Acquire or Partner With Other Businesses
Jim Henson once correctly said, “when you can’t beat them, join them.” The most prominent and perfect example that fits the above-given quote is Facebook, now called Meta. This happened when Meta acquired Instagram and Whatsapp, which were some of its biggest competitors. With this comes another tremendous strategy that can assist you in penetrating your business effectively.
To elaborate, while acquiring, you can always target your competitors like Meta or go for acquiring small businesses. When you acquire any business, you will automatically get control of its existing clientele base. This will ultimately add up to your clientele base and will assist you in having more market share under your wing. Besides, when you go for partnering with other businesses, there is also a major consideration. You should always go for businesses that complement your business in one way or another.
For example, recently, an Italian MNC, Ferrero Group, or simply Ferrero’s subsidiary brand Kinderjoy ‘Nations’ has announced its expansion in India. Along with its expansion, the company joined hands with Discovery Channel. The main aim of this partnership is to promote their unique animal collection in order to encourage kids to gain effective knowledge of wildlife. Now, as Kinderjoy is a specific product created for kids, partnering with an educating medium enhances the value of both partners. Additionally, it also gave them the opportunity to totally tap into their partner’s target market to acquire new customers or audiences.
Hence, both partnering and acquiring are both great ways to penetrate the market. The only need is to identify which form of market penetration of these two goes best for your business.
4. Acquire customers through cost leadership
As per the cost leadership strategy, companies look to develop a competitive advantage by offering a product or service at the lowest price. It is a strategic advantage that companies look to gain over their competitors. To explain, when companies offer the highest quality products at the lowest price, they attract new customers.
In such cases, businesses often try to become the price leader in the market. To define, a pricing leader refers to the dominating firm of the market that sets the price and the rest of other firms the competition follows. Businesses become the price leader by lowering their profit margins and grabbing the attention of their customers towards them. One of the biggest examples of effective cost leadership in the aviation industry is RyanAir. The company used a dynamic pricing strategy and became the cost leader in the aviation industry.
However, in the race to become a cost leader, you also have to ensure that you can not make your prices too low. This will directly impact the profitability of your business, or people can also doubt your quality. Besides, being a cost leader cannot be a long-term pricing strategy. Once you acquire a substantial share of the market, you can change the pricing strategy. The foundation for that would, of course, be excellent customer service. When businesses offer great customer experiences, customers are even happy to pay premium princess.
This way, dynamic pricing will assist you in attracting more and more customers from different social groups. This will ultimately assist in gathering a larger share of the market.
5. Embrace Product Diversification
Last but not least, a strategy that can assist in enhancing your market penetration rate is product diversification. For those who are not aware of the term, let us explain it to you. Companies apply product diversification by introducing new product lines or services to attain a greater market share. The underlying objective of diversification is to amplify business profitability.
In fact, there are a host of successful product diversification examples to look at. Disney went on to introduce its own OTT platform and cruises after starting with cartoons. Similarly, Coca-Cola ventured into the healthy drinks market after starting with carbonated drinks. When businesses expand, they can tap into more markets and acquire more customers.
As diversification allows you to add more variety of products to your business. By implementing this, you will easily be able to capture the largest share of the industry. However, every diversification strategy should be accompanied by a clear change management strategy. An effective change management approach ensures better integration of transformations in a business.
However, one of the biggest challenges that might occur in product diversification is failing to identify the potential of the target market. Hence, it is really essential to rectify the attractiveness of your target market before investing a huge amount in it. This is where the analysis of the business macroenvironment and microenvironment becomes essential.
To encapsulate, with the increasing competition in the business world, it often gets difficult for businesses to enhance their market penetration rate. Hence, the need is to effectively understand the market and utilize some of the effective market penetration strategies in order to enhance the growth of your business.
Besides, the above-given strategies will effectively assist you in skyrocketing your market penetration rate. So what are you waiting for? Utilize them and experience the difference yourself.
Featured Image Credit: Gustavo Fring; Pexels; Thank you!