Everyone wants their business to grow. This seems pretty intuitive when you consider that effective and successful growth means your business is seeing increased sales, brand awareness, brand loyalty, and more – and we know it is when we look at the most successful and well-known companies today view (e.g. Apple, Amazon, etc.).

The question is, what are these very successful companies doing to position themselves for strong and consistent growth?

Of course, there are a number of answers to this question depending on who you ask. In this blog post, however, we will focus on market penetration. So, What is market penetration?

Market penetration

Market penetration is the amount that a product or service sells to customers compared to the estimated total market for that product or service. This measurement can determine the potential market size or help develop a strategy for increasing the market share of a particular product or service.

How to calculate market penetration

If you are using market penetration as a measure, use the following formula to determine how often a product or service is used by customers compared to the estimated total market. In other words, take the current sales volume for your product or service and divide it by the total sales volume of all similar products available in the market.

(Number of customers / target market size) x 100 = market penetration rate

Monitoring your penetration frequently is important to determine whether your penetration has increased or decreased. If you are wondering how often to calculate penetration, it is a good idea to calculate it after every marketing and sales campaign you have run. This will highlight changes in penetration. This will also give you a better idea of ​​the success of your campaign (s).

Next, let's dig a little deeper into what penetration is and why it is such an effective growth strategy.

Understand market penetration

A company can use market penetration at the industry level to test the potential for certain products or services, or on a smaller scale to measure the market share of a product or service. It provides insights into how the market and your customers see your product or service.

What is high penetration?

When it comes to market penetration, you want your market penetration to be high. High market penetration offers many advantages.

Think of Nike, for example. The company is the market leader in sports shoes. If you walk into the sneaker section of a store like Foot Locker or Dick & # 39; s Sporting Goods, Nike consistently takes up a large chunk of the space.

That's because retailers like Foot Locker and Dick & # 39; s know that Nike delivers on sales. They also know that their customers expect a wide variety of Nike products to be found in their stores. Nike's popularity and brand name also guarantee better space and visibility. All of this is due to Nike's high market penetration.

Similar to Nike if you have high market penetration …

  • You are an industry leader.
  • You sell products or services that are already established in the industry.
  • They have a widely recognized brand.
  • You have good visibility in the market.
  • You have strong brand equity.
  • You're likely making your product for less than you could if you were a less established company given the size of your business.
  • They have high sales volume, which means that you have leverage between suppliers and sellers.

A high market penetration offers marketing advantages and more potential for further growth and success as a company. A high level of market penetration is of course the goal – but how do you achieve that? Well, Market development is a good start.

Market development vs. Market penetration

You may have heard of the term market development as it is used in relation to market penetration. Market development is a necessary strategy or measure to increase market share or market penetration. It requires a series of clear steps that will lead to an increase in the number of potential customers. To increase market penetration, focus on market development first. Let's look at an example.

Example of market development Increasing market penetration

A successful leggings brand, Booty by Brabants, has made waves in the sportswear industry in recent years. The brand has established itself as a seller of high-quality and unique leggings for women of all sizes.

By reviewing their market penetration, BBB was able to identify a small, existing market that they could tap – children's leggings. They found that selling children's leggings could help them expand their target audience and customer base without incurring additional costs and efforts.

Although BBB Kids leggings are not a major source of income for the company, they add to the existing line of products and attract new customers. BBB was able to identify an existing market that they had not yet entered and set clear steps to successfully enter that market. As a result, they expanded their product line, customer base, and market penetration.

Now let's look at the most effective ways to get started with your market penetration strategy.

Market penetration strategy

A penetration strategy is for a company to work towards higher market share by leveraging existing products in existing markets. In this way, a company (that already exists with a product on the market) can grow its business by increasing sales among those already on the market.

As you work on your penetration strategy, you may hear these words: Ansoff matrix.

The Ansoff Matrix is ​​a tool with four growth strategies that companies must consider.

Ansoff Matrix growth strategy


As you move right and up on this matrix, business growth strategies become riskier. We have included information on the Ansoff Matrix in this article as it further demonstrates and highlights the fact that market penetration is an extremely valuable and achievable way to effectively grow a business even when risk averse.

At this point, you may be wondering about the specific penetration strategies that you can employ in your company. Let's discuss some of these next.

Market penetration strategies

Here are some examples of effective penetration strategies that you can focus on and / or implement in your company.

Change your prices.

Reduce or increase the cost of one of your products.

Revise your marketing.

Revise your marketing plan and / or roadmap.

Identify the need for a new product and launch it.

Interview and analyze your customers and audiences to determine if a new product (or feature) is needed. Then create the product and sell it.

Update or change your product (or a specific feature of your product).

Solve your customers and buyers' challenges more effectively by updating or changing a product or feature.

Grow your business in new territories and offer franchise opportunities.

Identify new areas where you can expand and grow your business. Ask yourself: In what new areas can we open our stores or reach and contact potential customers? You may also offer franchise opportunities to grow your brick and mortar business.

Identify a business partner you want to work with.

Become a partner or merge with another company in a way that is mutually beneficial (e.g. running a co-marketing campaign).

Buy a small business or a competitor in your industry.

If you have the resources, consider getting a small business or a competitor in your industry to expand your customer base and offerings / capabilities. (HubSpot did this a while ago.)

Offer a promotional program to increase loyalty.

Allow customers to sign up for a loyalty program that gives them perks for providing their contact information (e.g. discounts, birthday gifts, inside information, etc.).

Develop a new marketing campaign.

Create and launch a marketing campaign or initiative to promote your product line in a unique and new way that your customers have not seen before. Analyze the success of your campaign so that you can refer to it in the future.

Increase sales force activity.

Encourage sales reps to increase the number of interactions with qualified prospects (e.g., focus on social selling and meet prospects where they are).

Finally, let's look at an example of market penetration in action.

What is an example of market penetration?

There are a number of examples of companies using market penetration to grow their business. Let's look at Dunkin for this piece.

Dunkin (formerly Dunkin Donuts) was founded in Quincy, MA back in the 1940s. Since then, Dunkin has grown into a globally recognized brand. Dunkin has grown significantly since then and has opened stores in 46 countries. Still, the company's most loyal customers remain in New England. In fact, there are 12,500 dunkins worldwide (9,000 of them in the US) – yet more than a third of Dunkin stores are in New England. In terms of penetration, Dunkin continues to develop its large and loyal market by opening and maintaining this large portion of its stores in New England.

For example, take a look at the following map: Boston is a small city, and you can walk between almost all 10 of these Dunkin 'locations in just a few minutes.

Dunkin Donuts example of market penetration


Dunkin knows where its customers are and that those customers want every … well, city block a Dunkin 'store.

Not only has Dunkin successfully penetrated its market by opening and maintaining so many stores in New England, but it has also increased its penetration through specific brand and menu changes.

Most importantly, they changed their name from Dunkin Donuts to Dunkin. The company makes 60% of its business in coffee and other beverages, so the "donuts" aspect of its original name was arguably a bit misleading. The CEO of Dunkin said this step was important as the new name "speaks for the breadth of our offerings."

The change in the brand name also signals to customers that a number of other menu items are available in addition to donuts. In fact, the name change has been combined with many menu additions, including healthier options, as well as specials for non-dairy and vegan customers, including their Beyond Sausage and Almond Milks.

All of these changes expanded Dunkin's customer base and target audience by placing more people in the market that they had already entered.

Invest in market penetration to grow better

We just covered a number of reasons why market penetration is so beneficial to the long-term success of your business. And as you learned from this blog post, it's a highly effective growth strategy that is usually low risk.

There are a number of market penetration strategies that you can choose, plan, and implement in your company. So choose the best option for your goals and get started.

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