Marketing and sales plans or competition of companies with other brands are formulated in order to increase the number of customers and the growth of the company’s market share. Therefore, every company employs brand penetration strategies to penetrate the heart of its target market by spending money and time and designing effective strategies.
Brand penetration is one of the important strategies that should not be ignored in the process of business growth and development. But what is the exact definition of brand or market penetration? How is market penetration measured? And what are the strategies followed by famous brands to increase their brand penetration rate? Also, is there a relationship between brand penetration rate and market share?
In this post, we will address all of the above questions.
What is market penetration?
Brand penetration or market penetration is the strategy of managing a brand and measuring its popularity in a particular market. The level of brand penetration or market penetration is determined based on the volume of successful sales of the brand’s products and services along with the position of the product in the market. This criterion shows to what extent your business has succeeded in current markets and in the mind of the customer.
Where did the concept of brand penetration come from?
Brand penetration originates from the product-market growth (also known as the Ansoff Matrix) and is considered one of its four strategies.
Igor Ansoff introduced this matrix in 1957, and today it has become a well-known tool in strategic planning.
In Ansoff’s matrix, the four business growth strategies are described:
- Market Penetration: Increasing the rate of sales of existing products in existing markets.
- Product development: Improving the product to meet more customer needs and increase product sales.
- Market development: Finding or creating new markets for existing products.
- Diversification (production of new products): Selling new products in new markets.
What is the importance of brand penetration?
In short, the brand penetration concept is important for the reasons listed below:
- Brand penetration is one of the strategies that help you with niche marketing and penetrating the virgin market sectors, which are the sectors that are far from the eyes of your competitors.
- Brand penetration is an effective approach to business revenue growth that multiplies the revenue of a business through rapid spread and introduction of a product to the market.
- Brand penetration is a criterion for the success of your business model and marketing strategy. The higher your market penetration rate, the better your marketing research, marketing planning, and marketing model choices.
- Measuring brand penetration in the market helps in the early stages of starting a business to determine the size of the market for products or services, and to know the number of competitors and their success rate. Using this information, the current position of the brand is determined and business growth and development are planned with lower risk.
What is the difference between market share and market/brand penetration?
Brand penetration or market penetration refers to the percentage of target customers who have purchased your product. This is while market share refers to the percentage of the market value of your product or brand out of the total market value.
Suppose, for example, that you are a provider of high-speed internet service and the number of your potential customers is 2,000. Now if you have actually provided this service to 1,000 of them, then your market/brand penetration rate/index is 50%.
In this example, your market share is calculated based on the total value of the internet market as a whole. This means that if the total market value is 1 million dollars and you have sold about 200 thousand dollars, then your market share is 20%.
How to measure brand penetration rate?
Brand penetration rate or index is the percentage of the target market that has bought the product or service at least once during a certain period of time.
To calculate the brand penetration rate, just divide the number of customers who have purchased the product or service by the total general population and then multiply the result by 100.
It is better to evaluate the brand penetration index periodically, once every 3 months for example. Of course, some brands also measure their brand penetration rate after each advertising campaign. In this case, the brand penetration rate is a measure of how successful the advertising campaign is.
What is a good brand penetration rate?
Brand penetration index can be different for different products. So, the ideal rate of your brand penetration is determined by the type of your product. To do this, you should know to which of the following categories your products or services belong:
- Primary products or services: Any products or services that companies or organizations need to produce their products and provide their services. For example, if you supply raw materials that sweet bakeries use in making their sweets, you are in this category. The ideal penetration rate in this type of business is between 10 and 40 percent.
- Consumer products or services: These are goods and services that are constantly consumed because of a need or habit and customers are always forced or eager to use them. This category includes final goods such as sweets, bread, cars, mobile phones, etc. The appropriate penetration rate for these services and products is between 2 and 6 percent.
Brand or market penetration refers to the percentage of target customers who have purchased your product, while market share refers to the percentage of the market value of your product or brand out of the total market value.
Eight strategies to increase brand penetration:
There are different strategies for brand penetration, usually, a combination of which is used to penetrate the market:
The first strategy: Adjusting the product price to penetrate the market
The oldest strategy to improve the brand penetration index is price reduction. This approach is still the most common method to give good results.
According to research, price is the first factor that attracts the attention of more than 70% of customers. This criterion plays an effective role in the customer purchase decision. Although your profit margin will decrease with price reduction, you can gain more market share by increasing your brand penetration rate.
If you lower the quality of your product or service to reduce the price, it is better to do more research before making the final decision to avoid customer churn.
The second strategy: Increasing advertising to increase brand penetration
Advertising and establishing brand awareness are simple and old methods to attract customers and, if planned correctly, can lead to many positive results.
Many brands use billboards and online advertising to maximize their brand penetration. They place their advertisements on billboards, social networks, website banners, and even use text messages so that customers will know and buy from them.
The third strategy: Production of new products
Making a new product is another way to improve the brand penetration rate. To succeed in this strategy, you need to find the needs to which your competitors pay less attention, then introduce new products in the market to meet these needs and gain new market share. Your brand penetration rate increases in proportion to the number of customers who buy from you.
The fourth strategy: Increasing the consumption and customers’ needs (Demand Generation)
In this strategy, you have to look for a way to increase the customer’s need to consume your products or services. A demand generation strategy can help you a lot in market penetration and increasing your market share, especially in the early stages of market entry. In this approach, your marketing strategies focus on increasing your product awareness, solutions, and competitive advantages.
For example, one method to increase the consumption of a sun cream of a certain brand is to point out, on its package, the importance of applying it every 4 hours.
The fifth strategy: Increasing sales channels
By increasing the number of agents and sales channels, more people will have access to your products or services, which facilitates customers’ access and purchase and increases the chances of brand penetration into the market.
The sixth strategy: Attracting competitors’ customers
Attract customers from your competitors by employing your competitive advantages or offering unique support. You may also offer smart discounts to attract competitors’ customers. For example, if your competitors have attracted the attention of students, making special offers to students will reduce your competitors’ sales and increase your market penetration.
The seventh strategy: Improve your product or service
The better the quality of your product or service, the more customers will be willing to buy from you. Of course, this increase in quality and improvement of the product must be done smartly. Besides, you should never forget the price of the product and its vital role in the purchase decision of customers.
The eighth strategy: Improving after-sales service
After-sales services are one of the important criteria for customers that play a key role in customer experience management. Maintain your relationship with the customer after the purchase process is completed, provide them with appropriate service and use their feedback to improve your service.
A closer look at the success of the largest multinational companies in market penetration
Here we wish to take a look at the global famous brands that you must have heard their names many times. But this time we will examine them in terms of brand influence:
Apple brand penetration strategies
Apple is constantly increasing the number of its authorized retailers. This way, it covers a larger geographical area and facilitates access to its products.
By doing this, Apple achieves more sales and penetrates markets in which it has not yet obtained a large share. Besides, extensive advertising, whether online or by other means, is always one of Apple’s market penetration strategies.
Demand generation is one of the other methods of Apple. For example, with the standardization of the charger and EarPods input in Apple products and after the introduction of AirPods, how many people have thought of buying this product? By recognizing the customer’s needs and smartly changing its product structure, Apple has made customers feel the need for new Apple products!
McDonald’s brand penetration strategies
One of McDonald’s techniques to penetrate the market is increasing the number of branches to increase the ease of access to its products.
By launching the drive-through service, this brand allowed customers to receive their orders in the shortest time without even leaving their cars. It also provided an easier service for customers to sit at home and benefit from McDonald’s delivery service. Moreover, if you look at McDonald’s prices, you will find that they end up with $0.99, which is very smart and impresses the customer.
Penetration strategies of Mac cosmetic brand
The high price of Mac cosmetics is one of the well-known features of this brand. In order for Mac to open its way to new markets, it launched its products in a smaller size. Through this strategy, customers with lower purchasing power such as students have become regular customers of this brand. By doing this, Mac not only increased the sales of its products but also gained a new market share.
Which brand penetration strategy have you chosen for your business?
Brand penetration determines the degree of influence of your products and services in the hearts of customers. Because, the more space you occupy in their hearts, the more your business grows and your revenue increases.
There are many market penetration strategies, and we have introduced some of them to you including price adjustment, demand generation, and ease of access to the product. We also mentioned the strategies used by the most famous and successful brands in the world and how they managed to prosper. Now, in your business, which strategy do you adopt to penetrate the market? And, in your opinion, which one is the most effective?