What is the market penetration strategy?

Asked By: Andoitz Echagoyen | Last Updated: 10th March, 2020
Category: business and finance marketing and advertising
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Market penetration strategy is focusing on selling your existing products or services into your existing markets to gain higher market share. It is an attempt by a company that is already in the market with an off-the-shelf product to get more sales from other market participants.

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Also, what is the penetration strategy?

Penetration strategy is the concept of taking aggressive action to greatly expand one's share of total sales in a market. The resulting increased sales volume typically allows a business to produce goods or obtain merchandise at lower cost, thereby allowing it to generate a higher profit percentage.

Also Know, how do you develop a market penetration strategy? Strategies

  1. Price adjustments. One of the common market penetration strategies is to lower the products' prices.
  2. Increased promotion. Businesses can also increase their market penetration by offering promotions to customers.
  3. More distribution channels.
  4. Product improvements.
  5. Market development.
  6. Penetration pricing.

Similarly, you may ask, what is an example of market penetration?

Market penetration: focus on current products and current markets in order to increase market share. Market penetration requires strong execution in pricing, promotion, and distribution in order to grow market share. Under Armour is a good example of a company that has demonstrated successful market penetration.

What are the advantages of market penetration?

Advantages of market penetration strategies include quick diffusion and adoption of your product in the marketplace, incentives to be efficient, discouragement of competition, and creation of goodwill. Disadvantages include lower profit margins, possible harm to your company's image, and the risk of a pricing war.

37 Related Question Answers Found

What are the 5 pricing strategies?

Generally, pricing strategies include the following five strategies.
  • Cost-plus pricing—simply calculating your costs and adding a mark-up.
  • Competitive pricing—setting a price based on what the competition charges.
  • Value-based pricing—setting a price based on how much the customer believes what you're selling is worth.

How does McDonald's use market penetration?

McDonald's has a new strategy to penetrate the market this summer. The object of market penetration is to sell more of the current product to the current market segment. The McDonald's strategy is to steal customers not only from other restaurants but from other places consumers buy soft drinks, like 7 eleven.

What is slow penetration strategy?

Slow Penetration:
The strategy consists of introducing a product with low price and low-level promotion. Low price will encourage product acceptance, and low promotion can help realization of more profits, even at a low price.

Why would you use penetration pricing?

Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. The lower price helps a new product or service penetrate the market and attract customers away from competitors.

What are the four major growth strategies?

There are four basic growth strategies you can employ to expand your business: market penetration, product development, market expansion and diversification.

What are four types of pricing strategies?

The diagram depicts four key pricing strategies namely premium pricing, penetration pricing, economy pricing, and price skimming which are the four main pricing policies/strategies. They form the bases for the exercise.

What is leader pricing strategy?

Leader pricing is a common pricing strategy used by retailers to attract customers. It involves setting lower price points and reducing typical profit margins to introduce brands or stimulate interest in the business as a whole or a particular product line. Products sold in this strategy are often sold at a loss.

What is an example of skimming pricing?

Price skimming is a pricing strategy that involves setting a high price before other competitors come into the market. Good examples of price skimming include innovative electronic products, such as the Apple iPhone and Sony PlayStation 3.

What is the difference between market skimming and market penetration?

Penetration pricing relies on a low upfront price to attract customers, while skimming is the use of high upfront prices to maximize short-term profits from the most eager and interested customers.

How do you measure market penetration?

To calculate market penetration, the current sales volume for the product or service is divided by the total sales volume of all similar products, including those sold by competitors. The result is multiplied by 100 to move the decimal and create a percentage.

What is the penetration rate?

Penetration rate is the percentage of your target market that you reach with a product, service or brand in a period of time.

What is the penetration pricing strategy?

Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth.

What is penetration analysis?

An analysis performed to determine the market share held by a particular company or product in a market segment determined by demographics or various classification universes.

What are the advantages of penetration pricing?

Advantages of Penetration Pricing
Economies of scale: The pricing strategy generates high sales quantity that allows a firm to realize economies of scale and lower marginal cost. Increased goodwill: Customers that are able to find a bargain in a product or service are likely to return to the firm in the future.

Who uses penetration pricing?

Utility Companies
Television and Internet providers are notorious for their use of penetration pricing — much to the chagrin of consumers who see massive sudden increases in their bills. Comcast/Xfinity, for example, regularly offers low introductory prices such as free or steeply discounted premium channels.

What is penetration in retail?

Penetration is a panel data measure. It is the % of households that have purchased a product, or shopped in a certain channel or retailer. In Nielsen the fact is called Item Penetration (for specific categories/brand/products) or Shopper Penetration (for channels/retailers).

What is price skimming?

Price skimming is a pricing strategy in which a marketer sets a relatively high initial price for a product or service at first, then lowers the price over time. It is a temporal version of price discrimination/yield management. Price skimming is sometimes referred to as riding down the demand curve.