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The technique of Market Penetration usually does not affect the overall marketing strategy of a company, but invariably brings a solid growth potential and an increase in revenue generation. A company trying to adopt the concepts of market penetration must remember to also implement specific plans and tactics to challenge the competitors and boost sales figures. However, it must also be considered that market penetration can be a risky affair and has some disadvantages also.
More commonly, this technique is useful whenever a business is selling prevailing products in an ongoing market. Marketers must take into consideration the relevant market development or expansion grid data to decide actually, which penetration tactic to adopt? In other words, the market may be saturated or it may be in an intense competition scenario or the products may have low turnaround time. Now what should be the best tactic for all of these different scenarios? Well, the answer to this question lies in the type of market penetration strategy you adopt. And yes, there are quite a few different penetration tactics to choose from. So without further ado, lets know about a few of them.
The strategy of Price Adjustment is one of the most widely used market penetration tactic. A market penetration example could be lowering of price of a product or service with the aim of increasing sales is a price adjustment tactic. Furthermore, the alteration (increase or decrease) in the price of a product after analyzing the competitors’ products is also a scenario of price adjustment. But, in the real sense this marketing strategy should be used very judiciously as overdoing it can lead to adverse results. Like, increasing your price consistently may make the customers to believe that you are a company of high-profit motive. Decreasing the price too often would make them to believe that your products are of sub-standard quality.
The drastic increase in promotion of a product (or service) can lead to dramatic results. For example, advertising can be a wonderful tool for increasing brand awareness. Companies do have a choice of making their campaigns long-term or short-term which depends upon their needs and budget. However, the thing to be considered is that whatever be the size of the campaign, it must be well-planned and thought-out. An easy to counter promotional campaign would be simply ruined by competitors in this age of cut-throat competition.
The strategy of Distribution Channels is one of the most constructive market penetration strategies. This strategy typically involves opening of new distribution channels through focusing on a particular distribution channel. For example, if selling through retail outlets is your primary channel, then you can learn to gain new channels liketelemarketing, e-mail marketing, online marketing etc. Such opening of new distribution channels pave the way for more new channels and thus lead to increased market space and overall profitability.
It is true that to really appeal to your customers, you must improve your product quality. However, sometimes by communicating to them about the better standard of the product itself can do the trick and no major improvement in the product may be needed. This is because most consumers are encouraged to buy a product just by its appeal and do not necessarily check whether it proves itself or not. Thus, only by doing slight adjustments with the product and it’s packaging you can appeal more strongly and increase your sales revenue.
A very potent method of market penetration is that of increased usage of any product or service. If a marketing promotion campaign is effectively delivered at a specific area, then it would lead to an upsurge in product use which would thus lead to better market penetration with the increase in sales figures.
Most marketers whenever think of growth, think of new launches. However, it is only partially true. Actually, it can be risky too. When a new product is being launched, there exists the risk of it being successful or not. But, an efficient distribution channel along with a smooth delivery process makes it sure that the product does meet the expectations. Similarly, entering a brand new segment of the market can be risky as well. Therefore, it is absolutely essential to know your market and your product in order to do well and beyond expectations. An effective way to do this is to properly communicate with the customers and be sensitive to their requirements and wants.
When it comes to adopting strategic options, it is crucial to leverage your business’s strengths in a correct and just manner. For example, by minimizing your variable costs, you can boost your sales and establish a barrier to entry for others. This is why many firms with superior technology and distinct processes are able to reduce variable costs and earn better gross margins per item sold. With a substantial share in the market and an efficient marketing process, your business could create a barrier to entry to prevent competitors from coming into your industry.
Although, the entire process of market penetration seems simple and monotonous, yet it’s a big challenge if you perceive it to be. To overcome the challenge, you need to be more unique and highly innovative in your approach. A repetitive selling strategy would yield unsatisfactory results and hinder your growth potential. So, it would be better to think different and modify your penetration tactics as and when required. By being more innovative and adding value to your products you enhance your success chances.
Some actions you could consider to be unique are:
The product penetration tactic of diversification entails manufacturing new products for new markets. The strategy of diversification is usually followed whenever, there is saturation in the current market or when environmental changes such as societal, economic, technological or regulatory make it very hard to generate new sales in those markets. This strategy is most commonly followed by those businesses in the health sector, such as hospitals. Hospitals have now diversified their services in the form of long-term care facilities, reimbursement, network referrals and utilization. Those firms that have diversified on opportunities of their strengths have been able to gain the most.
For some organizations, it is difficult due to one or more reasons to enter new markets. To solve such an issue, many of these organizations enter into a kind of strategic alliances with one another to operate in a particular market. Although strategic alliances can be formed into many forms, the more common one is the joint venture business, in which each partner business holds an equity position. The most common and natural strategic alliances are found in the pharmaceutical industry.
The Market penetration strategies make benefit of reduced prices to upsurge product demand and increase your market share. As the demand for your product increases, your business saves money on product manufacturing costs due to the larger volume of produce. Market penetration strategy isn’t going to work for all products and all types of businesses. So, some companies utilize different marketing strategies than the normal to be more effective.
Here are some advantages of practicing market penetration strategies:-
Now, let’s look at some of the disadvantages of market penetration strategies:-
In the given article, we’ve tried to showcase the several market penetration strategies. However, such tactics will be applicable best when you make use of multiple ones together. The increase of reach of your product should be accompanied with a subsequent increase in your promotions. After increasing the promotion, you are bound to grow the product usage and on the other hand attract competition from your rivals.