Penetrating New Target Markets: From Pre-Planning to Creating a Market Strategy to Maximize Commerci

There are many ways that you can grow your business in efforts to gain more market share. One of the most efficient ways to do this is through market penetration. Market penetration can be seen as both a measurement of how well a business is occupying a specific space and is also the strategy that a company takes to reach new customers

This strategy isn't simple, and many variables must fall in your favor to ensure that it's the right move. Today, I'll discuss the stages of market penetration and how to ensure your strategy maximizes your business' commercial potential without wasting any precious resources.

Is Market Penetration Right for Your Company?

Despite what you might think, market penetration strategies aren’t right for every company. Before moving forward into the pre-planning stages, you need to know that you’re making the right decision.

Market penetration is typically best for start-ups and young businesses without much market share to begin with. Before moving on, consider the following questions:

Is your market share increasing or decreasing at the present moment?

This question is crucial to your decision and might be more complicated than it seems on the surface. For one, you might notice that your sales are on the decline but at the same time, gaining market share over competitors might seem like a possibility. Also, if your sales have stagnated over the last few years, market penetration might be the correct course of action.

Are sales increasing?

If your sales are doing well and are on the upswing, now might not be the time for a drastic shift in market share strategies. On the other hand, if sales are growing, but not as sharply as a competitor’s, new market penetration might be the smart move.

Pre-Planning

This stage should not be overlooked and should take a considerable amount of time. Because market penetration strategies are drastic shifts in overall corporate strategy. The first thing that you should do during the planning stage is to identify which products and services to research in relation to entering new markets.

After this step is the market research phase in which must gather data about customers, competitors, and the state of the market overall. This information will come from both internal and external resources and collecting all of the data first before interpreting it is crucial to the success of your market penetration plan.

Outlining Your Market Potential

Every business in the world will face different internal and external challenges in the market penetration strategies. Outlining your market potential and feasibility will come down to working through the five following steps:

1. Identifying Big-Picture Demographics

To start with, you need to think broadly about the potential customers that you want to reach. Think big picture here as the next stage focuses on the customers that occupy your new market.

I’d recommend that you think about the most general demographic attributes such as age, gender, income, and ethnicity. This kind of information is usually available in census data that you’ll use to determine the size of your target market.

Which type of person are you trying to reach? As you look at this data, look for errors that demographics overlap as well as lines of division. From there, you can create your traditional customer profile. For example, your products might better serve males aged 35-50 with an income of 30,000 to 50,000. From this data, you can look at the census data to identify the size of your new market.

2. New Market Demographics

From the first stage, you’ll then look more at the local level of your market strategy should you not want to target a nation-wide audience. For example, your products or services might only appeal to a select few people, and if this is the case, your strategy must be more precise to ensure you are entering the correct market.

Some areas of the country might be statistical outliers from the national demographics found in census data. If this is the case, you need to create a more focused target demographic that will appeal to the people in the area. You can leverage the census data during this stage as well by establishing radiuses of target customers.

3. Calculate Your Market Range

After you've determined the total size of your new market, you'll need to add the number of national customers that would be interested in your products or services. Add this to your total count of customers in the immediate market.

4. Keep Expectations Reasonable

Not every product or service will achieve even 50% market penetration. In fact, most experts state that consumer products have an expected market penetration rate of just 2-6% while business products have the potential of 20-40%. This number might seem lower than you initially thought, which is why it's crucial to hamper your expectations.

Take your estimated customer count from the previous step and multiply it by your expected penetration rate (either 2-6% or 20-40%). This will give you a realistic expectation. If the number is incredibly low, new market penetration might not be in the cards for your company now.

5. Cost-Benefit Analysis

Take the estimated market penetration range and compare it to the number of customers you need to earn a profit. What are the results? You can’t ignore this data, and if the answer is in the negatives, it’s best to move onto a different market and start at square one again. You want to know before you penetrate the market that you’ll be successful. If the numbers don’t add up right now, don’t be discouraged, and try to find a new way around them.

If the numbers do look promising, on the other hand, it's time to move forward to the next phase of market penetration. This is where you'll determine your messaging, the value that you'll provide to customers in your new market, and how you can remain competitive.

Knowing the commercial feasibility of new market penetration is the most crucial step in the entire process. Hopefully, this guide has helped you get one step closer to your desired business growth.