market penetration
(noun)
having gained part of a market in which similar products already exist
Examples of market penetration in the following topics:
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Ansoff Opportunity Matrix
- Marketing penetration - This growth strategy uses current products and current markets with the goal to increase market share.
- Each strategy has a different level of risk, with market penetration having the lowest risk and diversification having the highest risk .
- The penetration that brands and products have can be recorded by companies such as ACNielsen and TNS who offer panel measurement services to calculate this and other consumer measures.
- In these cases, penetration is given as a percentage of a country's households who have bought that particular brand or product at least once within a defined period of time.
- While market penetration may come with the lowest risk, at some point the company will reach market saturation with the current product and will have to switch to a new strategy, such as market development or product development.
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Growth Strategy
- An example of horizontal integration would be Apple entering the search-engine market or a new industry related to laptops and smartphones.
- Market penetration occurs when a company penetrates a market in which current products already exist.
- This strategy generally requires great competitive strength, a strong brand, or both, as most market penetrations demand actively taking market share from current incumbents.
- Market development strategy entails expanding the potential market through new users or new uses for a product.
- Market research is critical in development strategies.
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Marketing by Individuals and Firms
- A marketing strategy is the combination of all of an organization's marketing goals into one comprehensive plan.
- Market Penetration: This strategy aims to increase sales of an organization's current products through an aggressive marketing campaign.
- Market penetration occurs when a company penetrates a market in which current or similar products already exist.
- The market penetration strategy is the least risky since it leverages many of the firm's existing resources and capabilities.
- A prominent example of market penetration was the emergence of Facebook in the social networking market.
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Marketing objectives
- Having identified stakeholder expectations, carried out a detailed situation analysis, and made an evaluation of the capabilities of the company, the overall marketing goals can be set.
- The process adopted for determining long-term and short-term objectives is important and varies significantly, depending on the size of the business, the nature of the market and the abilities and motivation of managers in different markets.
- market penetration, including sales (by volume and value), market share by product category
- Ultimately, this coordination between business functions is contingent on the market entry strategy employed as well as the degree of standardization or customization deemed.
- Having integrated at the function level, we next consider integration of the marketing mix elements.
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New Product Pricing
- Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
- Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term.
- The advantages of penetration pricing to the firm are as follows:
- This can achieve high market penetration rates quickly.
- To gain further market share, a seller must use other pricing tactics such as economy or penetration.
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Market Share
- Market share is key metric that helps firms evaluate demand in their market and can be influenced by PR and marketing campaigns.
- Market share is a key indicator of market competitiveness—that is, how well a firm is doing against its competitors.
- Firms with market shares below a certain level may not be viable.
- New brands not only require lower prices to penetrate the target market, but they typically require more investment as well.
- Discuss how companies use market share as a key indicator and tool to increase market competitiveness
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Demand-Based Pricing
- These include: price skimming, price discrimination, psychological pricing, bundle pricing, penetration pricing, and value-based pricing.
- Pricing factors are manufacturing cost, market place, competition, market condition, and quality of the product.
- Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
- Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term.
- The main disadvantage with penetration pricing is that it establishes long term price expectations for the product as well as image preconceptions for the brand and company.
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Demand-Based Pricing
- When a company sets an initially low entry price (lower than the eventual market equilibrium price) to attract customers, they are engaging in penetration pricing.
- Penetration pricing is used when the marketing objective is to increase market share/sales volume.
- Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product.
- Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
- Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term.
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The Marketing Mix
- The marketing mix is used to reach a target market and is often referred to as the "four Ps" of marketing: product, price, promotion, and place.
- The marketing mix is a business tool used in marketing and by marketers.
- The marketer should set a price that complements the other elements of the marketing mix.
- There are various strategies that can be applied when pricing a product like skimming and penetration pricing.
- Penetration pricing can be applied when you want to enter a market and price your product lower than the perceived market price so that more people will buy it and this will increase your market share.
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New Product
- Penetration and skimming are two strategies employed in pricing new products.
- Two general strategies are most common: penetration and skimming.
- Such a strategy should generate greater sales and establish the new product in the market more quickly.
- A penetration strategy would generally be supported by the following conditions: price-sensitive consumers, opportunity to keep costs low, the anticipation of quick market entry by competitors, a high likelihood for rapid acceptance by potential buyers, and an adequate resource base for the firm to meet the new demand and sales.
- Compare penetration and skimming as two strategies for setting a price level