Every small business aspires to grow as a Fortune 500 company one fine day. In fact, any business wants to keep growing in an incremental way to scale to new heights. Besides, this is what makes the corporate world so competitive. The ultimate goal of every business is to penetrate its market to capture market share in its own way. This explains why businesses are so focused on market penetration strategy.
The fact of the matter is that business growth strategies cannot exist without market penetration tactics. A company’s market share will always be a key performance indicator of that company’s advancement and power.
Further proof, in every industry, we identify the top performers in market share. For example, if we talk about the smartphone industry, Samsung and Apple are the biggest players with a dominant market share. They always have stiff competition in dominating the industry. However, due to some special market penetration strategies, Samsung dominated the smartphone industry leaving Apple in second place.
To prove it, in second quarter of 2022, Samsung came out on top with a market share of 21.8. Meanwhile, Apple is in second place with 15.6% market share. Most of us can attribute Samsung’s success to its market penetration strategies. This example shows a clear case of paying attention to the needs of a solid market entry plan. However, what exactly does the term market entry mean? Let’s find out with us.
What is market penetration?
Market penetration is a measure of a company’s share of the overall market for a product. In detail, it determines the usage of a product relative to the total estimated market size for that product. For service businesses, it will be a measure of the level of service usage by consumers compared to total market size for that service.
Now, let’s also look at the definition of market entry strategies. It is the course of action that a company initiates to increase its share in the general market. Besides, market penetration is one of the four elements of the Ansoff Matrix. To explain, the Ansoff Matrix is one of the widely adopted strategic models used by companies. A company market penetration Strategy is a set of tactics aimed at increasing its market share.
Let us understand the same through an example. Currently, Tesla holds more than 70% market share in the electric vehicle market in the US. Now, let’s say the company aims to achieve 90% market share in the next three years. To get there, the company will need to develop an effective go-to-market strategy. The penetration strategy KPIs will determine whether the company is meeting its business goals.
Now we know all about what market penetration What is and what is the market entry plan. To enter the market successfully, companies need actionable strategies. This is what this meticulous blog is all about. The next section lays out some incredible strategies for entering the market.
5 business strategies for successful market penetration
1. Revolutionize your advertising methods
Marketing and promotional strategies today have become a mainstay on which the growth of every business depends primarily. Statistical data (vtldesign dotcom) shows that big names like Salesforce and Oracle spend 20% or even more of their revenue on marketing. Besides, the same reports also confirm that marketing is ultimately responsible for generating 38.4% revenue growth of companies. This brings us to the first marketing penetration strategy. In this you must ensure that you need to improve your advertising methods.
Just to be clear, thanks to technological advancement we have tremendous marketing resources such as affiliate marketing, social media marketing etc. Apart from the origins, technological advancement has even revolutionized the way marketing practices done in the past. 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 the brand’s simple messages in the most impressive form to attract more potential consumers.
Thus, revolutionizing promotional practices will help you raise awareness and brand visibility of your business. This more brand awareness will help you attract more customers. Besides, this will assist you to gain a larger share of the market effectively.
2. Raise your business territory
The business territory here is all-inclusive distribution channel through which you offer your product or service in the marketplace. Distribution channel plays a huge role in market penetration effectively. The success mantra is simple, the more distribution channels you have, the easier it is for you to reach your target audience.
Therefore, to penetrate the target market effectively, you need to raise the territory of your business. For online media, you can enhance your distribution channels by
- Create a website
- Sell features of different social media
- Collaboration with e-commerce sites
- Create separate apps
For offline vehicles, you can invest in more construction Tile shops. Alternatively, you may also find opportunities to franchise others. Instead of handling it all yourself, you can let your other franchise partners handle it. This will assist you in expanding your business network to your business partners as well as your customers.
This way, you will be able to leverage different distribution channels to get more customers to your business. Thus, you will succeed in gaining more market share for your business.
3. Acquire or cooperate 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 quote above is Facebook, now known as Meta. This happens when Meta acquired Instagram and Whatsapp, which are some of its biggest competitors. Along with that is another great strategy that can help you penetrate your business effectively.
Just to be clear, during acquisition you can always target your competitors like Meta or acquire small businesses. When you acquire any business, you automatically gain control of its existing customer base. This will eventually add to your customer base and will give you more market share under your wing. Besides, when you start to cooperate with other businesses, you also need to consider a lot. You should always be looking for businesses that complement your business in one way or another.
For example, recently an Italian MNC, the Ferrero Group, or simply Ferrero’s sub-brand Kinderjoy ‘Nations’ announced an expansion of operations in India. Along with the expansion, the company joined hands with Discovery Channel. The main aim of this partnership is to promote their unique collection of animals to encourage children to gain effective knowledge about wildlife. Now, because Kinderjoy is a specific product made for children, partnering with an educational medium enhances the value of both partners. In addition, it also gives them the opportunity to completely penetrate the partner’s target market to acquire new customers or audiences.
Therefore, both partnership and acquisition are excellent ways to enter the market. The only thing necessary is to determine which of these two forms of market entry is best for your business.
4. Attract customers through cost leadership
Under a cost leadership strategy, companies seek to develop a competitive advantage by providing a product or service at the lowest price. It is a strategic advantage that companies want to gain over their competitors. To explain, when companies offer the highest quality products at the lowest prices, they attract new customers.
In such cases, businesses often try to be the price leader in the market. By definition, the price leader refers to the company that dominates the market setting prices and the rest of the competitors that follow. Businesses become price leaders by reducing their profit margins and attracting customers’ attention to them. One of the biggest examples of cost-effective leadership in the airline industry is RyanAir. The company used a dynamic pricing strategy and became the cost leader in the airline industry.
However, in the race to become a cost leadership, you must also make sure that you cannot set the price too low. This will directly affect the profitability of your business, or people may also doubt your quality. Besides, being a cost leader cannot be a long-term pricing strategy. Once you gain a significant share of the market, you can change your pricing strategy. The foundation for that, of course, will be excellent customer service. When businesses provide great customer experiences, customers are even more happy to pay premiums.
In this way, dynamic pricing will assist you to attract more and more customers from different social groups. This will ultimately aid in gathering a larger market share.
5. Improve product diversification
Last but not least, one strategy that can help improve your market penetration rate is product diversification. For those who don’t know about this term, let us explain it to you. Companies adopt product diversification by introducing new lines of products or services to gain a larger market share. The basic goal of diversification is to increase business profits.
In fact, there are many examples of successful product diversification to consider. Disney continues to introduce OTT . Platform and cruises after starting with cartoons. Similarly, Coca-Cola has ventured into the healthy drink market after starting with carbonated drinks. As businesses expand, they can enter more markets and gain more customers.
Because diversification allows you to add a wider range of products to your business. By doing this, you will easily capture the largest market share in the industry. However, every diversification strategy needs to be accompanied by a clear change management strategy. Effectively change management approach ensures better integration of conversions within an enterprise.
However, one of the biggest challenges that may arise in product diversification is not identifying the potential of the target market. Therefore, it is really necessary to recalibrate the appeal of your target market before investing a large amount of money in it. This is when the analysis of the macro and micro environment of the business becomes necessary.
In summary, with increasing competition in the business world, businesses often find it difficult to improve their market penetration rates. Therefore, the need is to understand the market efficiently and use some market penetration strategy to enhance the growth of your business.
Besides, the above strategies will greatly assist you in skyrocketing your market penetration rate. What are you waiting for? Take advantage of them and experience the difference for yourself.
Featured image credit: Gustavo Fring; Bark; Thank you!