The first thing you want to know when launching the new product, do you have enough users to ensure the profit and growth of your business. One of the essential instruments to get the correct answer is to measure the market penetration rate.
The market penetration rate evaluates how much product is being sold according to the total estimated market for that product. Cprime Studios create a detailed guide on how to define a potential market penetration rate for your product. This article will focus on how to increase this rate with efficient market penetration strategies.
- What Is Market Penetration Strategy
- Ansoff Matrix and Four Market Penetration Strategies
- How to Optimize Market Penetration Strategy
- Other Steps in Increasing Market Penetration
- Final Thoughts
What Is Market Penetration Strategy?
First, we need to outline the market penetration definition. Market penetration is the extent of product recognition in a particular market. It defines the success of selling the product. That is why it is essential to understand the market's potential size and what share of this market can be grabbed by the selling team.
Market penetration rate can be lower than the number of customers you need to get a profit. Also, it can be higher or similar. To increase the rate, you need to find the right market penetration strategy.
Ansoff Matrix and Four Market Penetration Strategies
There are many ways to define the niche or target audience for your product. You can use statistics, list all the factors and tech limitations that influence your startup, define your customers' needs, and calculate the right niche. To learn more about using these techniques to determine market penetration, you can also from Cprime Studios guide on market penetration rate evaluation.
This article will focus on examples of market penetration strategies and one of the most commonly used frameworks for strategic planning. Ansoff Matrix is an efficient tool for product management to evaluate market penetration rate and create a strategy for growing product sales. This matrix was developed by a mathematician and business manager, H. Ansoff, and published in Harvard Business Review in 1957.
It consists of four grids that evaluate the possible situation of product launch:
- existing product to the existing market,
- new product to the existing market,
- existing product to new market
- new product to the new market.
Based on this matrix and the pre-launch situations, we can delineate four basic market penetration strategies.
- Lower price, better service, and additional features. You can use this strategy if your DevOps team has unique expertise and creates cheaper but more competitive products. In this case, you will have superiority in the existing market, as you will propose a better product for a lower price. It is a lower-risk strategy, but at the same time, it requires extra efforts from the development and marketing team. This strategy is effective when your team is confident in creating the product for the existing market because they speak the same language with your clients, understand all the needs, and know what additional features will increase the market penetration rate.
- Create your niche. It is risky for the startup to develop a new product for an existing market. In this case, the strategy is to create your niche by creating a shortlist of ideas and choosing the one that targets the market your team knows the best. This strategy envisages that you will research the market and discover the pains of customers no one has addressed yet. As we already mentioned, this strategy has a high risk because it requires high expertise from the team. That is why you need to prove the concept and make a business analysis before working with product development.
- Solve new problems. If you are working for a new market, you can look at the products you already created for another one. For example, you already developed a tracking system software for the logistic industry. You also can learn what new markets can become the clients of the same system. The risk of this strategy is based on the level of research you can make in a new market. It can be challenging if the market is entirely new for your team. You need to analyze how to adapt your product to this market and what additional features you need to create to fit users' needs from a new niche.
- Create an innovation. It can be the most challenging strategy to launch a new product in a new market. There is always a chance that your development will become a new Amazon or PayPal. At the same time, you need to be sure that your ideas are unique and profound in market research. If you found your breakthrough idea and can build innovation for a new market, this strategy of increasing market penetration rate will be the easiest for you.
How to Optimize Market Penetration Strategy
Each market penetration strategy we discussed is based on the market and the type of product you will launch. Next, we will point out essential optimization tips for the method of increasing the penetration rate.
- Partnership or acquisition. In some cases, it can be easier to join or buy your competitor. This strategy works if you realize that you can use some other product features in the market and get the best solution for the target audience.
- Improving the product. If you already launched the product, but it does not have the penetration rate you expected, you need to research to improve it. It is crucial to tell the clients about your benefits and listen to their remarks about the products.
- Marketing investment. When you work with an existing product for a current market, you need to spend more on promotion. In some cases, you will need to find creative marketing strategies to find new customers and ensure that your product is the best for their needs.
Other Steps in Increasing Market Penetration
As we already pointed out, the definition of market penetration strategy is only a part of the rate-increasing process. There are three steps to increase the penetration rate:
#1. Define a target audience. This is the step of choosing the market penetration strategy we were talking about.
#2. Choose the team. It can be a professional from different industries or an outsource development company.
#3. Evaluate potential market penetration rate. In this step, you will evaluate the risks and manage your strategy based on the rate.
In any case, an efficient market penetration strategy will increase sales, improve product visibility and enhance brand equity. That is why it is essential to spend time on marketing research and find the best solution for your product.
The market penetration rate is one of the essential measurement tools for the successful launch of your product. It is crucial to evaluate this rate and choose the best strategy to increase it. Moreover, it would be best to focus on assessing the penetration rate, as this data will help you improve the strategy. This article defines market penetration and delineates the primary step in selecting the market penetration strategy.
Cprime Studios have prepared an e-book on market penetration rate evaluation and choosing the right strategy for your product. This research and our expertise will help you build a successful product that will fit the customer's expectations and increase your revenue in the future.
If you still need consultation on choosing the right market penetration strategy, you can contact our specialists.