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Definition of penetration pricing4/11/2024 ![]() For example, a CRM product could have an email integration feature added to it so that it appeals to users who were shying away from it earlier. Stripping a product of its complexities and making it irresistible to use is a useful market penetration strategy.Īnother impactful market penetration strategy is to add more features to an existing product without turning it upside down. One way of doing it is by simplifying the buyer’s journey, i.e., by making it intuitive for customers to use a product. This strategy increases revenues from a single existing customer.Īs more products and services enter a market, it is increasingly difficult to get a buyer’s attention. The SaaS company can onboard more users as existing users begin experiencing its benefits. For example, a SaaS product may have 50 users within an enterprise customer’s company. This market penetration is used to increase the usage of a product within the customer base. are different modes of aggressive advertising. Television, print media, billboards, hoardings, banners, street corners, etc. Words such as ‘Hurry, stocks disappearing fast,’ ‘offer valid until stocks last,’ and ‘offer valid until Dec 31 only’ are examples of emotional hooks.Ĭompanies use aggressive advertising as a market penetration strategy to reach a broader target audience. Some companies prefer using the discount word and often make it compelling with emotional hooks that persuade customers to purchase it. Companies reduce the sale price to make it attractive and make it affordable for more customers, who couldn’t purchase it earlier. Let us now look at popular market penetration strategies that companies leverage.Ī tried-and-tested method of increasing market penetration is to lower the price of an existing product line. In contrast, if Xelor's competitors were to do the same and increase market penetration and its market share, Xelor would see a drop in its market share. Xelor has also expanded its market share from 25% to 30.7% (10 million Xelor users/32.5 million users is 30.7%). 32.5 million watch users in the total market of 300 million. Xelor has increased market penetration from 10% to 10.8% (2.5 million new users/300 million target group is 0.8%). If Xelor were to run a marketing campaign aimed at a target audience who do not wear wristwatches and can get 2.5 million new customers, then:ġ. Now, here's the real kicker: market penetration or activities pursued to increase market penetration improve the market share of a product. ( Damn!)Īlthough used interchangeably, market penetration and market share are different yet closely related. Now, if there are 7.5 million Xelor owners out of the 30 million wristwatch users, then the market share of Xelor is 25%. In the previous example, let us assume there exists a premium brand of wristwatches called Xelor. Let us now understand the difference between market share and market penetration. *Market share is defined as the amount of business a specific company controls in a market. Market penetration is a set of activities pursued by companies and businesses that increase the market share* of a specific product or service. When expressed in the form of a percentage, wristwatches have a market penetration of 10%. The formula for market penetration is the number of people who wear a watch (30 million) versus the total target group (300 million). Let us further assume that among the 300 million potential users, 30 million wear wristwatches. Let us assume the target audience size is 300 million. The potential market for it is significant. Let's understand this better with an example:Ī wristwatch is a ubiquitous article of daily use. It is the measure of product adoption versus the theoretical market for the product. Market penetration can be one of two things depending on the context. "Market penetration is a low pricing strategy adopted by companies for new and existing products to attract a larger number of buyers and a larger market share" - (Kotler and Armstrong, 2009) Considering the numerous elements of a marketing plan, in this article, we deal with a specific one from the mix, i.e., Market Penetration. ![]() An integral aspect of the aforementioned strategic plan is a marketing plan.Ī marketing plan serves as a guide towards the ultimate marketing objective(s) of a company. Your game plan must be tailor-made to your objectives, industry, and opportunities. It doesn't matter what line of business you are in - whether you run a large technology firm or you are a solopreneuer, you need a game plan. "For tomorrow belongs to the people who prepare for it today." Usually, it is applied to merchandise that is selling in a specific geography. Market penetration is the art and science of increasing sales of existing products/solutions/services without changing them.
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