Market Penetration

Pricing Strategies in Marketing

John O'Shea

It’s disheartening to see a brand you’ve worked so hard to build lose its market share to competition. Often, this is not about what you’re doing right about the brand rather, what you’re not doing that is hindering growth.

This is where market penetration strategies come in.

In this guide we cover:

-Market penetration strategies
–How to calculate market penetration

–Pricing strategies in marketing

What is market penetration?

Market penetration is the ratio of services/products sold against the projected total estimate. Brands need to know their market penetration to have a sense of their estimated total market size and percentage of customers buying their services and products. This, ostensibly with the aim of eliminating competition and owning the entire market share. Market penetration also refers to actions brands take to surpass competitors and control a large market share to become a market leader. Knowing the percentage of the market size you control is critical for both established and new brands.

How Do You Calculate Market Penetration?

Calculating the market size in its entirety and getting an estimate of the proportion you own is useful for both established and new brands. Thankfully, there’s a formula you can use to know how much of the market share you control against the total market share as below:

(The number of customers/The target market size) x 100 = Market Penetration Rate

It’s important to monitor your market penetration to determine any decreases and increases. It’s recommended that you calculate your market penetration after running a sales and marketing campaign. This way, you can tell the changes in penetration and gain better insight on the success of your marketing efforts.

Market Penetration Strategy

You need to have a good strategy to increase penetration. Market penetration strategy refers to where your company deliberately works towards attaining a higher market share by leveraging existing markets and products. It’s essentially how an existing company can grow through increasing sales among those already in the market.

Market penetration strategies are anchored on four growth strategies for entering an existing or new market for established or new product or service based on the Ansoff Matrix. Here are 10 common market penetration strategies are:

1. Dynamic Pricing

Brands engage in vicious price wars with the aim of persuading customers to purchase their services and products for the best price. This market penetration strategy becomes complicated and more intense with price adjustments all day long.

With dynamic pricing, the systems are automated so that the software researches the set prices and the market in general to deliver actionable intelligence.

2. Add distribution channels

3. Target specific territories

While some services and products are seasonal, others are location based. When you target a specific location, you can boost sales within the area.

4. Change or update your product

If you can trace your market share to a specific service or product then you can rely on the feedback from customers to improve product features. When you understand consumer preferences for your products you can even change it to make them love it more.

5. Expand to new territories

You need to identify new territories where your brand can expand and grow. Think about the new areas where you can prospect or open stores. You could also consider franchising as an expansion strategy.

6. Create entry barrier

Creating an entry barrier for competing brands using existing resources or identifying those who want to make a superior product. This will make it difficult for another brand to compete with yours.

7. Partner with another business

Think of mutually beneficial ways you can partner with another business or brand to push sales. It could be a simple co-marketing campaign.

8. Purchase a competitor or small business within your industry

When you have the resources, acquire your competitor or small business within your industry. The idea here is so you can broaden your offerings and customer base.

9. Run a promotional campaign for boosting loyalty

You can run a promotional campaign that will get consumers customers to sign up in return for freemium products like discounts, inside information and discounts.

10. Craft a new marketing campaign

Craft and launch a new marketing campaign that promotes your product line in a new and unique way that customers have not seen before. Carry out an analysis of the success of your campaign for future reference.

Pricing Strategies in Marketing

Pricing is one of the most preferred market penetration strategies yet quite confusing. A price penetration strategy isn’t the same thing as low price. While the intention of a low price strategy seeks to permanently keep the prices low, market penetration pricing strategy is employed to keep prices low at the introductory stage when entering a new market.