You have fund, you have the manpower, you have a good location.
Do these factors sufficient for a successful business? Can any businessman/businesswoman take his/her business to the next level with the help of these factors?
Stay for a while and think… What did your mind answer to these questions? Did your mind answer ‘yes‘ to these questions? If yes, then you are not fully right.
Apart from fund, manpower, suitable location, and some other factors, there is a very common thing that makes a business successful and that is a substantial strategy.
Hello all, Quitoffer offers you a warm welcome. Again we are here to discuss another kind of business strategy. Today we’ll dive into the business ocean for the market penetration strategy.
In this blog, we are going to discuss “What is market penetration strategy? – with its pros and cons.”
What is market penetration strategy?
Market penetration is the first quadrant of the Ansoff matrix. This strategy emphasizes the concept of expansion of business within the same market by enhancing the market share.
With this strategy, the company tries to increase the sales of its existing product without entering into the new market. The company focused on its growth within the pre-developed market.
The company tries to increase its growth percentage by focusing on the established market.
It is safer for a company to work in the current market than in the new market. The market penetration strategy is a panacea for businesses that want to increase their market share within the established market.
Companies increase their growth by increasing their sales volume. An increase in sales acquires more market share for the company which in turn takes the business to the next level.
- Acquisitions : a strategy to expand the business.
- Hostile takeover : a forcible purchase!
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When implementing this strategy, the company works on the current product to strengthen its current position within the market in which the company is present.
How to apply market penetration strategy?
1. Reduction in product price ->
Reduce the price of the product without degrading the quality of the product.
It often happens that if your product is providing the same quality that your competitor is providing but at a lower price. In such a situation your customer base grows.
A reduction in product price is the best way to win the competition. But you have to go through a risky scenario of not degrading the quality of your product. Your product should remain the same as before.
There should be very little change in your product. That is why price penetration or reduction in product price is not a piece of cake. One should take care of all the aspects while applying this strategy.
3. Merger and Acquisitions ->
MandA, by acquiring the competitor’s company any business can enhance its market share..
There is no doubt about the ability of these business expansion tools merger and acquisitions.
2. Promote your business by keeping comparison shopping in mind ->
There is no question over the role of marketing to enhance the sales volume. Effective marketing is the key action of any successful business.
The company that wants to enhance its market share within the pre-developed market needs to focus on comparison shopping to draw the competitor’s customer.
Comparison shopping takes place at the customer’s end to make reasonable purchases of a product offered by various companies just by comparing product prices.
3. Make your policies flexible to the customers ->
Policies like credit policy, return policy, customer support and many more are the very important factors that make a business successful.
One should take care of his/her business policy to provide them attractiveness.
Many people are unable to follow a rigid credit policy. To add those people into your customer base you should provide flexibility and make your policy adaptable.
You should expand the return policy span to enhance the market share.
4. Provide attractive rewards to your customer ->
People love prizes and bonuses. To enhance your customer base, you should provide fascinating rewards as much as possible. The more you offer bonuses and extra offers, the more your product demands increase.
You can conduct different types of events to attract customers. Where you can give fewer but bigger rewards to your customers through many types of interactive events.
5. Provide an effective customer support ->
When it comes to the queries of your clients, it becomes overwhelming for any business. Your reach to your customers should be easy and non-distracting.
Customers may face different types of problems while dealing with your product. In order to resolve them and to develop a respectable place in your customer’s heart you should make your customer support excellent.
Remember that better customer support brings the customer back to the company.
Advantages of market penetration strategy
- As it is related to the enhancement of the market share, this strategy can strengthen the customer base of any company.
- It focuses on price penetration or price reduction that can attract customer attention.
- It creates entry barriers that are considered good for any business health.
- It increases sales volume.
- Market penetration strategy helps a business to grow rapidly amid a very competitive environment.
Disadvantages of market penetration strategy
Despite having many benefits, this strategy also has some drawbacks. These are: –
- When following this strategy most of the companies’ product lost their true quality due to price penetration which in turns make the image of the product negative.
- Sometimes the strategy of market penetration deprives the company of the kind of people who feel humiliated to buy a cheap product, and thus the company may lose a good customer segment.
- Good customer support is required to handle the expanded customer base. And sometimes this strategy increases sales volume to such an extent where the customer service department comes under pressure and gives poor performance.
- Another drawback of this strategy is that after increasing market share through price penetration, it becomes difficult to bring the price of the product back to the previous position.
- Sometimes it provides zero results. When a company decreases the price of its product, its market share increases. But the ultimate goal of a company is to make a profit and for that when it increases the price of the product, the customers try to find a substitute for that brand.
Time to conclude
In the last, we can say that market penetration is an effective tool to expand and grow a business. It works as a panacea for a business.
Market penetration strategy could give unexpected results to a business if it is applied under the guidance of a good leader.
But no one can turn their face away from the weak side of this strategy which we have discussed above. The more benefit this strategy brings, the more risk is associated with it. One must apply this strategy carefully and with an effective plan.
So, that is about the market penetration strategy. Quitoffer is expecting that you got a proper clarification of this strategy in “What is market penetration strategy? – with its pros and cons“. If you have any queries or want to say something about this blog, do comment in the comment section.