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How to Create a Market Penetration Strategy
By
2022-05-24
In our previous article, we covered the basics of growth strategies and briefly outlined your four common growth strategies.
Let’s take a look at the first growth strategy that your SME could consider:
What is a market penetration strategy?
Wikipedia defines Market Penetration as "the successful selling of a product or service in a specific market. It is measured by the amount of sales volume of an existing good or service compared to the total target market for that product or service. Market penetration is the key for a business growth strategy stemming from the Ansoff Matrix Richardson…”
It is a strategy you can use to gain market share from competitors and increase sales of your existing product in your existing markets. Typical goals include:
- Increase your sales from existing customers by getting them to purchase more of your products more often
- Attracting new customers away from your competitors
Benefits of a market penetration strategy for growth
A market penetration strategy is a relatively low-risk and effective strategy for SMEs looking to increase their market share but unable to invest in strategies that are seen to be high-risk and at a higher cost.
Rapid growth can be seen if your objective is to enlarge your customer base. If your pricing is deemed to be lower than competitors, you can increase the number of products you order from suppliers to meet your consumer demands, potentially saving money on certain areas of manufacturing due to an increase in the volume of production.
I adopted a market penetration strategy in 2013/2014 when I needed to grow my agency, Adclick Africa. I quickly identified a need for programmatic advertising through a DSP in South Africa. I increased sales and revenue by offering advertisers a platform to purchase ads at a cheaper rate than purchasing from a publisher directly.
How to create a market penetration strategy
For many SMEs, lowering the prices of your products may not be sustainable, however, this can be the lowest-risk strategy as a short-term market penetration strategy.
Here are a few tactics you could deploy as a market penetration growth strategy:
- Change your pricing. Have a look at what your competitors are charging for their products and either raise or lower your prices marginally.
- Discount your prices to be more competitive (offer price promotions, weekly special offers)
- Build brand loyalty programmes to encourage your customers to buy more within a certain period
- Acquire a competitor in your market. Look for any potential competitors that complement your brand and offering and if you are in the position to do so, explore joint ventures.
- Enhance your product to better suit your consumer's needs
- Increase your distribution channels and methods. You can do this by taking your business online (eCommerce stores or developing an App), opening franchises across the country or adding a reseller channel to your supply chain.
- Relook your digital marketing strategy to increase your brand awareness and engagement. Adjust it to be more aggressive with your marketing campaigns and advertising (both traditional and digital formats)
But where to start?
Engage with an experienced business mentor. They can help you assess where your business is at currently, what the needs and demands are of your consumers and agree on measurable tactics to move your business forward. Contact a SME Advice Expert to map out your market penetration strategy.