What is Market Penetration ??

                                                                     

                  Market Penetration

What it is:

Market penetration is the percentage of a target market that consumes a product or service. Market penetration can also be a measure of one company's sales as a percentage of all sales for a product.

How it works (Example):

Companies produce goods and services with a specific population or market in mind. In a broad sense, market penetration is a measure of individuals in a target market who consume something versus those who do not. For example, if a company determines that product ABC has a market of 50 million people and of those 10 million purchase it, then product ABC's market penetration would be 20% (10,000,000 / 50,000,000 = 0.20).

Why it Matters:

Market penetration for a good or service indicates potential for increased sales. In other words, the smaller a product's market penetration, the more a company should invest in its strategy for marketing that item. For this reason, high market penetration indicates that a product has become established and the company is a market leader.

Advantages and Disadvantages of Market Penetration Strategy:

Market penetration strategy takes advantage of low prices to increase product demand and increase market share. While the demand is increasing, the organization saves money on product creation costs due to the greater volume of production. Though, market penetration strategy doesn’t work for all products and businesses, so some companies use different marketing strategies that seem to be more beneficial.

Advantages of Market Penetration Strategy

Fast Growth – If your business and marketing objective is to enlarge your consumer base, then market penetration is the most effective way to act. When you offer better prices than your competitors, luring out their customers becomes easier that previously expected. Consequently, fast growth is heavily linked with low prices, and the more reasonable they are, the higher the impact will be.

         

Economic Advantages – Definitely, it’s a responsible call, but market penetration can bring cost advantages if your business development goes the way you predicted and hoped.

Combat Competitors – One of the best parts of the market penetration strategy is combating your competitors. Imagine, you have numerous competitors that are trying to evolve and progress, they are stealing customers from you that results in lowering your profits and revenue. So, considering that you’re willing to stay as the market leader, the only choice you have is to outplay them.

Disadvantages of Market Penetration Strategy:

Missed Opportunities – Brands that produce luxury products often make mistakes like marketing it as a cheap item. Customers who love luxury products will definitely avoid the product which was marketed as a “cheap luxury.” So, if you’re focused on luxury products keep in mind that lower prices might make it look disappointing.

 

Poor Company Image – If your company has several product lines (that includes a luxury line), then using market penetration strategy might be harmful. For instance, if you implement a market penetration strategy for a single product, it may badly reflect on the rest of your product lines.

Lowering Industry Prices – Market penetration strategy can harm the entire organization. If competitors sell similar products and one of them decides to lower prices, it’s natural that others will try to match them to create a balance and avoid consumer shifting.

Lack of Results – Market penetration strategy isn’t always effective, especially when a company enters an industry where prices are already set low.
For example, when prices are already low, it means that consumers have already built trust towards an existing company, so entering the market and trying to beat the price of the competitor is an ineffective way to act.

Product branding and their strategies

                      Product Branding Strategy

 What is product branding? Simply put, it is how a product interacts with its consumer audience through design, logo, and messaging. It is difficult to settle on one product branding definition because branding triggers an emotional connection in consumers. If done well, product branding can be maintained and produce a solid, well-connected connection throughout the life of the product. The challenge, however, lies in new media, licensing and social media, where the “message” might be communicated via the audience and not the expert branding professionals.

                            

                      

Marketers have three major strategic options-

1-     Manufacturer branding vs. private labels

2-     Individual branding vs. family brands

3-     co-branding

                  

Manufacturer vs. Private Brands

When a brand identity is clearly linked with the manufacturer of the product, it is called a manufacturer brand. Also known as a national brand, marketers usually choose this option when the firm has a strong, positive image. But some products, especially if they are not well-differentiated in the marketplace, benefit by being associated with the store where they are sold. For example, major drugstore chains routinely offer their own private-label brands of staple products like pain relievers and skin cream.

Individual vs. Family Brands

Individual branding is a strategic approach used by firms with sufficient resources to create a separate identity for each product they offer. It makes the most sense when a company sells items in very different categories, like candy and detergent, or to highly distinct target audiences. Conversely, firms with multiple offerings in the same category, like soup or cereal, often market a variety of products under the same name. This use of a unified platform is called family branding.

Co-branding

Co-branding is a strategy that links two existing brand names to create an identity for a new product. There are three variations of this approach. Ingredient branding is when one product is integral to the other, like an ice cream brand blended with a well-known liquor. Cooperative branding involves two or more brands sharing a promotion. For example, Hilton Hotels and Hertz might advertise jointly for holiday vacationers. In complementary branding, brands are marketed together to suggest the benefits of using both, like a restaurant offering discounts at a local movie theater.