Definition: Penetration defines how many users are there for a product. It is one of the measures of a company or industry's success in getting consumers to use their products. The penetration numbers for India are very low in most products, like telephones (tele density) or shampoos, soaps, cosmetics and so on.
Full Answer
What is market penetration and brand penetration?
Market Penetration (%) = Customers Who Have Purchased a Product in the Category (#)/Total Population (#) Brand Penetration (%) = Customers Who Have Purchased the Brand (#)/Total Population (#) Two key measures of a product's "popularity" are penetration rate and penetration share.
What is the penetration of a product?
Definition: Penetration defines how many users are there for a product. It is one of the measures of a company or industry's success in getting consumers to use their products. The penetration numbers for India are very low in most products, like telephones (tele density) or shampoos, soaps, cosmetics and so on.
What is the penetration rate?
The penetration rate (also called penetration, brand penetration, or market penetration as appropriate), is the percentage of the relevant population that has purchased a given brand or category at least once in the time period under study.
What is penetration share?
It is defined as the number of people who buy a specific brand or a category of goods at least once in a given period, divided by the size of the relevant market population. Penetration Share (%) = Customers Who Have Purchased the Brand (#)/Customers Who Have Purchased a Product in the Category (#)
What is consumer penetration?
Key Takeaways. 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.
How do you penetrate your customer?
How to Penetrate the Market with a New Product the Easy WayCreate a product push strategy from product position to training. ... Keep your salespeople involved. ... Train your sales team. ... Help your salespeople own their learning. ... Create a sharing environment. ... Engage new opportunities with existing customers. ... Product positioning.More items...
What does penetration mean in advertising?
Market penetration is the amount of a product or service that is sold to customers compared to the estimated total market for that product or service.
What is a penetration strategy example?
Launching a new product into the market is another market penetration example that can be used for growing a business. Companies tend to generate a lot of hype amongst their target markets when it comes to releasing new products.
What is definition of penetration?
Definition of penetration 1a : the power to penetrate especially : the ability to discern deeply and acutely. b : the depth to which something penetrates. c : the extent to which a commercial product or agency is familiar or sells in a market. 2 : the act or process of penetrating: such as.
How can I improve my penetration in retail?
Following are the different market penetration tactics:Price Adjustment. The strategy of Price Adjustment is one of the most widely used market penetration tactics. ... Augmented promotion. ... Distribution Channels. ... Improving Products. ... Upsurge Usage. ... Knowing Risk and Growth. ... Create barriers to entry. ... Be unique and think differently.More items...
What is another way to say market penetration?
1. black-market. adjective. distributed or sold illicitly.
How does market penetration help a business?
A market penetration strategy is a product market strategy whereby an organization seeks to gain greater dominance in a market in which it already has an offering. A subset of this strategy often focuses on capturing a larger share of an existing market through a process known as market development.
What is the importance of market penetration?
Market penetration is important to both established companies and startups trying to cultivate a customer base. A market penetration strategy that combines thoughtful product development, a clear pricing strategy, and clever marketing campaigns can help a company increase its market share.
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.
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.
How to calculate 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.
How is market penetration measured?
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.
Why is market penetration important?
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.
Why do market leaders negotiate better terms with their suppliers?
Also, market leaders can negotiate better terms with their suppliers because of their significant sales volume. As a result, market leaders can often produce a product cheaper than their competitors, given the scale of their operation.
What is Penetration Rate?
The penetration rate is one of the best indicators for evaluating a market. As explained at the beginning of this article:
What is a good example of a company using marketing to improve its penetration rate?
Hopper, one of the most downloaded applications in North America, is a good example of a company using marketing to improve its penetration rate.
Why is the market penetration indicator important?
It is also an essential tool for measuring the potential of a market. This is particularly the case for the launch of a new product or service. The indicator will be used to assess the market penetration rate of this new offer.
How to calculate penetration rate?
Penetration rate = (Number of customers / total number of people in the trading area) X 100
What does it mean when your penetration rate is decreasing?
On the other hand, a penetration rate that is decreasing from one period to another will show that the competition has an advantage. This rate will then be a clear signal that you need to readjust your marketing strategy. A marketing agency can help you with this.
Why is penetration rate important?
the penetration rate and the analysis of its evolution are essential to measure the degree of effectiveness of a marketing campaign and its impact on the company’s activities.
What is an indicator?
An indicator to assess the potential of a market. It is also an essential tool for measuring the potential of a market. This is particularly the case for the launch of a new product or service. The indicator will be used to assess the market coverage rate of this new offer.
What is penetration in India?
Definition of 'Penetration'. Definition: Penetration defines how many users are there for a product. It is one of the measures of a company or industry's success in getting consumers to use their products. The penetration numbers for India are very low in most products, like telephones (tele density) or shampoos, soaps, cosmetics and so on.
What are the factors that determine the penetration of a product?
Penetration of a product depends on several factors, like income, marketing activity , needs, positioning, logistics of making the product available in the first place , demographics as well as an understanding of consumer needs.
What is personal selling?
Definition: Personal selling is also known as face-to-face selling in which one person who is the salesman tries to convince the customer in buying a product. It is a promotional method by which the salesperson uses his or her skills and abilities in an attempt to make a sale.
What does rising penetration mean?
Description: A rising penetration of products in the country signifies a greater consumer class, willing to use products. Rising penetration should translate into rising market share for the leader as well.
Is it a motive to sell a product every time?
However, getting a customer to buy a product is not the motive behind personal selling every time. Often companies try to follow this approach with customers to make them aware of a new product. The company wants to spread awareness about the product for which it adopts a person-to-person approach.
What does it mean to have a higher market penetration?
That means if a company has higher market penetration, it means that the company is a market leader in that industry .
Why is market penetration important?
Fast Growth – Market penetration is the best way to enlarge the consumer base. When better prices are offered to consumers, market share expands easily than before. As a consequence, growth occurs in the firm rapidly. Also, the sales and marketing strategies target the customer base ensuring a greater outreach.
What are the economic advantages of market penetration?
As a result of lower prices than competitors, more consumers will buy the product which will result in higher profits. Alternative strategies will lead to attracting the lost customers and it will create an edge over the competitors.
What are the disadvantages of a product?
Some of the disadvantages are –. Unrealized Production Costs – Lowering the product price may lead to an increase in more number of consumers buying the product but it will also lead to production costs not being met and hence might result in losses.
How is market penetration calculated?
Market penetration is calculated as how much the product or service is being used by the customers in comparison to the total market for that product or service and is generally used as a means to create a position in the market especially in the primary stages of setting up of the business, which helps it to establish and develop a direction to expand and achieve growth in the market.
What is poor company image?
Poor Company Image – When a company produces more than one product, lowering prices of one product may lead to a bad image to the other products of the company and hence, the brand reputation may fall.
What is after sales service?
After-Sales Service – Providing after-sales service to the customers improves their satisfaction upon using the product while leads to them suggesting to consumers of competitor’s products which leads to personal promotion.
What is market penetration?
Market penetration refers to a quantitative measure of the sales of a product or service. Products and Services A product is a tangible item that is put on the market for acquisition, attention, or consumption while a service is an intangible item, which arises from. compared to the total estimated market expressed as a percentage.
How to calculate market penetration?
To calculate the market penetration of an offering, the current sales volume of that product is divided by the total sales volume of all the products with similar features or that fulfill the same needs. They include products sold by the company’s competitors as well. The resultant number is multiplied by 100 to achieve a percentage.
How can Companies Increase Market Penetration?
It includes strategies related to advertising, direct sales outreach, social media campaigns, lowering prices, bundling product offerings, etc.
Why is market penetration important?
Market penetration is also used by established companies to determine the potential to increase their overall revenue by increasing market share.
What does percentage mean in sales?
Also expressed as a percentage, it represents the company’s total sales of that product compared to the total market (company’s and competitor sales).
When a company enjoys a high degree of market penetration for its products, it is considered a market leader?
When a company enjoys a high degree of market penetration for its products, it is considered a market leader in that sector. It gives them a unique marketing advantage since they can access a larger pool of potential customers.
What does it mean when a market is saturated?
In such a situation, the market will be referred to as a saturated market, which means that opportunities for growth are small. Existing companies already hold much of the market share, leaving little room for sales growth.
What is the meaning of "penetration"?
Penetration is a panel data measure. It is the % of households that have purchased a product, or shopped in a certain channel or retailer. Higher is better and 100% penetration is as good as it gets.
What is the annual penetration of Brand X in the New York market?
If annual penetration of Brand X in the New York market is 56%, it means that 56% of all households in the New York market purchased Brand X at least once during the year. Reference articles: Data Dictionary, The Panel Chart Every CPG Analyst Should Understand.
What Does Market Penetration Mean?
When a product is launched for the very first time, when the company decides to be present in another region or country and when the firm enters a market segment not addressed before, all of them are cases of market penetration. In marketing, there is also a frequent monitoring of the market penetration rate, which is a way of measuring how much potential there is to increase sales and expand the consumer base. The company or the product with higher market penetration is therefore the market leader.
What does it mean when the penetration rate is close to 100%?
If penetration rate is already close to 100% there is low growth potential . Commonly, the market penetration is estimated as brand sales divided by total market sales, being either in value or in units. However, penetration can also mean number of buyers, consumers or households that regularly use the product versus competitors.
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 shareor a percentage of the total number of potential customers in the industry. For example, if there are 300 million people in a country and 65 million of them own cell phones, the market penetration o…
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 pen…
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 …
Example of Market Penetration
- By the fourth quarter of 2017, Apple Inc. (AAPL) had amassed a market share of more than 50% of the smartphone market throughout the world.1 Apple has consistently introduced new versions or their iPhones with added enhancements and upgrades, including releasing its high-end iPhone X. As a result of its market penetration, Apple has a larger market share than all of its competito…