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Market Penetration

Market Penetration

What Is Market Penetration?

Market penetration is a measure of how much a product or service is being utilized by customers compared to the total estimated market for that product or service. Market penetration can likewise be utilized in creating strategies employed to increase the market share of a specific product or service.

Figuring out Market Penetration

Market penetration can be utilized to decide the size of the likely market. Assuming the total market is large, new contestants to the industry may be encouraged that they can gain market share or a percentage of the total number of expected customers in the industry.

For instance, in the event that there are 300 million individuals in a country and 65 million of them own cell telephones, the market penetration of cell telephones would be roughly 22%. In theory, there are as yet 235 million additional expected customers for cell telephones, or 78% of the population stays undiscovered. The penetration numbers could show the potential for growth for cell telephone creators.

All in all, market penetration can be utilized to evaluate an industry as a whole to decide the potential for companies inside the industry to gain market share or develop their revenue through sales. Returning to our model, the global cell telephone market penetration is many times used to estimate whether cell telephone producers can meet their earnings and revenue estimates. Assuming the market is thought of as immersed, it means that existing companies have by far most of the market share — practically ruling out new sales growth.

Market Penetration for Companies

Market penetration isn't just utilized on a global and broad scale to measure the scope and for products and services, yet in addition is utilized by companies to survey their product's market share.

As a measurement, market penetration connects with the number of potential customers that have purchased a specific company's product rather than a contender's product, or no product by any stretch of the imagination. Market penetration for companies is normally communicated as a percentage, meaning the company's product addresses a certain percentage of the total market for those products.

To ascertain market penetration, the current sales volume for the product or service is separated by the total sales volume of every single comparable product, including those sold by contenders. The outcome is increased by 100 to move the decimal and make a percentage.

Assuming a company has a high market penetration for their the products, they're viewed as a market leader in that industry. Market leaders have a marketing advantage since they can arrive at additional expected customers due to their deeply grounded products and brand. For instance, a market leader and manufacturer of grain will have undeniably more shelf space and better situating than contender brands in light of the fact that their products are so well known.

Likewise, market leaders can haggle better terms with their providers in view of their huge sales volume. Thus, market leaders can frequently create a product less expensive than their rivals, given the scale of their operation.

Expanding Market Penetration

While market penetration is a measurement to decide the level of market share gained and the potential for new sales, market development centers around the moves toward achieving the gains in market share.

Market development is in many cases a strategy of specific subtleties or action steps expected to increase the number of possible customers. A few strategies utilize advertising, social media campaigns, and direct sales outreach efforts to possibilities of undiscovered market fragments. Bringing down prices and bundling product offerings can likewise assist with gaining traction in already undiscovered segments of the market.

For instance, a laid out company could have a product that has a large percentage of the market share for ladies. Nonetheless, the company, following its market penetration analysis, acknowledges they have a small market share with male customers. Therefore, they could foster a specific product and marketing effort campaign intended to increase their male clients.

Market penetration, as a measurement, can be recalculated following the different sales and marketing campaigns to decide their level of progress — whether market share increased or diminished. Market penetration furnishes companies with tremendous understanding concerning how their customers and the total market view their products. The figures can, thus, be compared to specific contenders to decide how the company is faring in its sales efforts and how its products and services stack up to the competition.

Illustration of Market Penetration

By the fourth quarter of 2017, Apple Inc. (AAPL) had amassed a market share of over half of the smartphone market all through the world. Apple has reliably presented new forms or their iPhones with added improvements and updates, including delivering its high-end iPhone X. All because of its market penetration, Apple has a larger market share than its rivals combined.

Notwithstanding, the company actually has opportunities to add to its customer base by targeting its rivals' clients and charm them over to Apple products and services.

Highlights

  • Market penetration likewise connects with the number of potential customers that have purchased a specific company's product rather than a contender's product.
  • Market development is the strategy or action steps expected to increase market share or penetration.
  • Market penetration is a measure of how much a product or service is being utilized by customers compared to the total estimated market for that product or service.