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What Is Market Penetration?

Market penetration measures how much of a potential market a company has captured with its products or services. It is calculated as a percentage and can be used to assess an industry, determine growth potential, and evaluate a company's market share. Companies seek to increase penetration through targeted marketing, advertising, pricing strategies, and product development aimed at untapped customer segments. Measuring changing penetration rates helps companies evaluate the success of their efforts to gain new customers and expand their share of the total available market.

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Ikramul Haque Nipu
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233 views2 pages

What Is Market Penetration?

Market penetration measures how much of a potential market a company has captured with its products or services. It is calculated as a percentage and can be used to assess an industry, determine growth potential, and evaluate a company's market share. Companies seek to increase penetration through targeted marketing, advertising, pricing strategies, and product development aimed at untapped customer segments. Measuring changing penetration rates helps companies evaluate the success of their efforts to gain new customers and expand their share of the total available market.

Uploaded by

Ikramul Haque Nipu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Market Penetration

What Is Market Penetration?

Market penetration is a measure of how much a product or service is being used by customers
compared to the total estimated market for that product or service. Market penetration can also be
used in developing strategies employed to increase the market share of a particular product or
service.

Understanding Market Penetration

Market penetration can be used to determine the size of the potential market. If the total market is
large, new entrants to the industry might be encouraged that they can gain market share or a
percentage of the total number of potential customers in the industry.

In other words, market penetration can be used to assess an industry as a whole to determine the
potential for companies within the industry to gain market share or grow their revenue through
sales. Revisiting our example, the global cell phone market penetration is often used to estimate
whether cell phone producers can meet their earnings and revenue estimates. If the market is
considered saturated, it means that existing companies have the vast majority of the market share

Market Penetration for Companies

Market penetration is not only used on a global and industry-wide scale to measure the scope and
for products and services, but also is used by companies to assess their product's market share.

As a metric, market penetration relates to the number of potential customers that have purchased
a specific company’s product instead of a competitor’s product, or no product at all. Market
penetration for companies is typically expressed as a percentage, meaning the company's product
represents a certain percentage of the total market for those products.

Increasing Market Penetration

While market penetration is a metric to determine the level of market share gained and the potential
for new sales, market development focuses on the steps to achieving the gains in market share.
Market development is often a strategy of specific details or action steps needed to increase the
number of potential customers. Some strategies employ advertising, social media campaigns, and
direct sales outreach efforts to prospects of untapped market segments. Lowering prices and
bundling product offerings can also help gain traction in previously untapped portions of the
market

For example, an established company might have a product that has a large percentage of the
market share for women. However, the company, following its market penetration analysis,
realizes they have a small market share with male customers. As a result, they might develop a
specific product and marketing outreach campaign designed to increase their male clients.

Market penetration, as a measurement, can be recalculated following the various sales and
marketing campaigns to determine their level of success—whether market share increased or
decreased. Market penetration provides companies with enormous insight as to how their
customers and the total market view their products. The figures can, in turn, be compared to
specific competitors to determine how the company is faring in its sales efforts and how its
products and services stack up to the competition.

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