Market Penetration – Types of Market Penetration Strategies

Market Penetration

Market Penetration occurs by increasing the sale/consumption of a product or service to current segments in a given market without changing the product. So the growth in sales is usually due to improvement in marketing mix i.e. improved design, enhanced distribution efforts. Along with reduced price or aggressive marketing campaigns. Market Penetration Strategies helps in determining the effectiveness of the successful business model and efficacy of the marketing strategy.

Types of Market Penetration Strategies

Below is the list of 6 different types of market penetration strategies. You must be well familiar with all of them.

• Product Improvements
• Price Adjustments
• Increased Promotion and Advertisement
• Distribution Channels
• Market Development
• Penetration Pricing

Product Improvements

The most widely used market penetration strategy “Product Improvements”. Improvements in products or services are imperative to attract target customers and achieve high market penetration. By improving the quality, the businesses are able to outperform competitors and are able to meet customers’ expectations. Actually which results in attracting new customers and increased sales. The improvements in products can regenerate consumers’ interest in declining products or services. However the change could either be in packaging material, design of products or the way a service is rendered. Nor the change whether big or small or of any kind should be significant enough to be noticed by customers.

A company can also achieve higher sales if it is able to increase the usage of its products by existing customer base. It can be achieved by rapidly changing the technologies which will ultimately encourage users to upgrade the product.

Price Adjustments

This market penetration strategy is considered as the star of all the market penetration strategies. Price Adjustment is considered as the most heavily deployed marketing strategy. When a company pursues this strategy the prices of products undergo reduction. So this strategy enables the company to attract price sensitive consumers and aims at gaining penetration through large sales volume of a product. Hence the goal is to divert the attention of customers from competitor’s products to company’s products.

However, the results can be catastrophic for a Company if the strategy is not executed properly. When the prices are dropped the margins also drop. Moreover if the reduction is not supplemented by increased sales volume then either the product would need modifications. Nor the prices need to be readjusted again. Price adjustments can also affect brand and product positioning.

Increased Promotion and Advertisement

These are the most preferred market penetration strategies and everyone wants to use them for their business growth. Increased promotion easily enables the company penetrate in the Market. However promotions are usually in the form of free samples, bundled products, schemes, offers etc. To penetrate the market, a company usually offers discounts and return back facilities thus giving lucrative incentives and thus ensuring increased sales.

A company can also enhance the ways by which it advertises its products to increase market penetration. For example a company using below the line advertising could also opt for above the line advertising and vice versa.

Distribution Channels

These market penetration strategies are very easy to manage. Distribution channels are a link between businesses and intermediaries and are used to deliver products to the end consumers. Strong distribution channels that have wide outreach, contribute to higher sales volumes for businesses. Effective distribution channels ensure 24/7 availability of product and can increase consumer awareness about the product. Moreover they alter the perception of consumers regarding the product and the brand. With the help of strong distribution channels a business can influence the competitors to change their strategies and even drive them out of the market.

Market Development

Market development is considered as the key to market penetration strategies. It means expanding to new potential users. The targets of this penetration strategy are the people who have never bought a company’s products or services. So the company adds new people to its potential customer base and increases the boundaries of its market.

A company can also add people to its user base by aggressively targeting developing or by identifying new segments in the current market. However, before developing new market, assessment of all associated risks is a key factor. As if the profit potential of such market is low than the result will be loss of time and money. Only the company that is sure about the profit generation capability of its product and is confident. In fact that the product would be able to appeal to consumers should embark upon a Market development strategy.

Penetration Pricing

Penetration pricing strategy is used at the time of introduction of a new product in the market. Furthermore its objective is to attract the customers from the competitors. In this strategy the new product is sold at a price that is ominously lower than the price offered by competitors. This strategy helps the company to rapidly penetrate in the market and is built on the notion that customers will prefer. Also will switch to the new product because of its relatively low price.

The prices can be elevated subsequently when a large user base has been achieved by the company and many of the customers will be forced to stay with the product. Since because of higher cost associated with switching to competitors. Availability of surplus capital is the backbone of this strategy as the reduced price can consume significant resources of the company before revision of prices. Sales generation occurs by advertising through word of mouth. Moreover the customers tell other potential customers of benefits of products. Also the affordability attributed to low prices.

Price penetration is most effective in case of High price elasticity of product, extensive economies of scale, High demand of product, and suitability of product for mass marketing.