They also need to research the competition and find ways to differentiate their products or services. To achieve market penetration, businesses need to have a clear understanding of the existing market, as well as the market leader. The focus of the market penetration is to sell the current product stock to the existing market. For example, before implementing a market development strategy, you might want to: Competition is fierce, no matter which business youre in. Competition. For instance, a software house designed a new software product. What Is Market Development Strategy? SEO and content marketing would allow you to approach customers and rank up in the searches. For one, it can be challenging to generate momentum. Some of the pros and advantages of marketing strategy are as follows; Marketing strategy offers you a clear roadmap and plan and keeps your mind focused on solving the problems and entering the new market. Simply put, a market development strategy can be an excellent choice for business growth. Under these circumstances, it would be wiser for small companies to focus on product packaging, marketing campaign, and public image because it has the potential to be as effective as low prices. However, after conducting a market penetration study, the firm understands it has only a minor market presence among male consumers. This allowed them to better articulate the value of their software. In my opinion, there are only two key strategies: evolving into a digital bank or developing a digital ecosystem around the bank. Forbes Business Development Council is an invitation-only community for sales and biz dev executives. 0800 181 4422. Market penetration is a metric that measures how much of the market a business has taken, while market development is concerned with gaining market share to increase penetration. Importance, Stages, Tips, Advantages and Disadvantages of Digital Marketing. The principles of the bank's operation may not change or may change slightly. The bank licenses other financial companies to create unique products for their customers for example, savings accounts, loans and debit cards. Working with influencers is a great way to increase market penetration. Youll be able to assess the effectiveness of your campaign(s) this way. They also need to be prepared to make adjustments along the way. Note, that the campaign must be well-planned and analyzed because if your ad looks like XX% off on Y Product for a limited time can be easily countered by competitors with their own promotional campaigns and also retrieve their lost market share. It amplifies the probability of sales, growth, and success of your business in the long term. An example of a large product sector for women may be an established business with a product that has a significant market share. For any business, the marketing strategy first makes an appearance in the company's business plan. Select Accept to consent or Reject to decline non-essential cookies for this use. Although the development of a great marketing strategy attracts new customers, the downside is that its too expensive. Creating a marketing strategy will help you discover what makes you different so you can map out a clear strategy to communicate those benefits. If you identify a need for a new product in the market, you can launch it to increase market penetration. It is the successful selling of a product or service in a given market. But keep in mind, no matter what marketing strategy you use, if you don't have an effective sales funnel or pipeline and optimize your conversions, you'll be leaving money on the table. The most important element of a market strategic campaign is to recognize the needs and wants of target customers. By implementing a market development strategy, the NBA brought televised games to China, where just a decade later its become the most popular sports league in the country and. It enabled college students to compare headshots and choose who was hot, or not. To calculate market penetration, you need to know two things: 1) the size of your target market, and 2) how many people in that target market have purchased your product or service. If you liked this article, we bet that you will love the Marketing91 Academy, which provides you free access to 10+ marketing courses and 100s of Case studies. All Rights Reserved. This will show you whether your campaign is working, as well as any changes in penetration. This could involve changing your target market, your messaging, or your overall approach. Market Share can be increased through initiatives such as price cuts, promotions, and marketing campaigns. As well as attracting new customers, market development also looks at expanding sales through new or alternative uses for your product. If a marketing strategy has to do with distribution, examining the costs of different distribution methods will help determine if the strategy should be implemented. This is because penetrating the market can help a company reach new customers and grow its customer base quickly. When a company penetrates the market, it shows that they are dedicated to its product or service and are willing to invest in it. Economic Advantages Definitely, its a responsible call, but market penetration can bring cost advantages if your business development goes the way you predicted and hoped. Your email address will not be published. ride sharing, luxury upgrades, etc. Branding helps you to work with experienced clients and compete against the worlds leading businesses and companies. This can be done by simplifying the buying process, providing free shipping, or offering financing options. Selecting the right media platform to launch your campaign is the key to the success of your campaign. Poor Company Image If your company has several product lines (that includes a luxury line), then using market penetration strategy might be harmful. I've seen this strategy applied by banks around the world. Disadvantages of Product Development Strategy Riskiness. Fixed costs don't change with the number of units you produce, whereas variable costs do. Being an entrepreneur you to deal with many challenges and make small decisions, and those small decisive steps would determine the success of the organization. Companies do so by meeting the list of requirements that customers are demanding. ride sharing, luxury upgrades, etc. Disadvantages of Direct and Indirect Exporting Increased risks and start-up costs as related to indirect exporting: establishing operations in any foreign country is usually associated with high costs of starting like registration and hiring foreign representatives and distribution. For instance, one thing is acceptable in one part of the world and unacceptable in the other. This is how Tinkoff (an Andersen client) and Ant Financial work. The market strategic campaign allows you to promote your business and spread your brand awareness. This is where market development comes in as a beneficial strategy. To put it simply, take your products current sales volume and compare it to the total sales volume of similar products on the market. Becoming technologically fresher and starting the transformation process of the core business, thus creating a startup atmosphere. Here are some market penetration strategies you can consider: 1. ), and product development strategy. Or it is another region within a country. Market penetration is important because it allows for easy diffusion of a product or service in the market. So, periodically updating your product (always to better, never lower the quality) and changing its packaging will, most probably, benefit your business. Hi, I am an MBA and the CEO of Marketing91. Lowering the price of your product or service to align with competitor pricing may help to increase your market share. As the founder of a startup, you will undoubtably find yourself forced to make countless important decisions that, collectively, will determine the overall success of your company. Its because of diversification (scooters, bike, food delivery, etc.) This could involve aggressive advertising, providing discounts, or launching new products. What tips would you add? One of the primary benefits of exporting is access to a global market of buyers. Market development strategy falls under the category of business growth strategy, and it means introducing new existing and current products into the new market. This differentiation in the market has set them apart from other products with very similar features. Coca-Cola has also employed several pricing strategies to attract new customers and maintain its market share. However, when you are entering into new markets, then you would need a consistent flow of resources and per capita, and it can be highly risky without it. As long as your product is comparable in value to your competitors, then pricing may be an easy way to stay competitive. Will you create a new product? For instance, if you implement a market penetration strategy for a single product, it may badly reflect on the rest of your product lines. Use tab to navigate through the menu items. In many cases, if the marketing strategy has more advantages than disadvantages, this strategy could be implemented. Surveying and interviewing your customers and your team can reveal innovative ways that people are using your product to solve their problems. As your business grows, its important to consider ways to increase your market share. It is calculated by taking the companys total sales over a given period and dividing it by the total addressable market (TAM) during that same period. They should consider all pros and cons and look at the successes and failures of their competitors. 1. Definition. As the software became the Facebook we know today, it became increasingly important to reach new users and markets in order to expand. While market penetration is the lowest risk growth strategy, market development is a close second because unlike product development and diversification these two strategies dont include the extremely high risk nature of developing and selling a new product. The marketing team should also adjust the price to achieve a marketing competitive advantage. three days. Market penetration can lead to fast growth for a company. An entrepreneur must examine each marketing strategy and weigh their benefits and costs. These decisions may feel small when they involve things like who to hire and when, but they will almost certainly feel more consequential when they involve things like optimizing sales models, pricing models, and high impact growth strategies. No longer was their tool just another group messaging platform, it was for businesses who want to streamline and save costs with 75% less email, zero effort knowledge management and team communication thats instantly searchable and available wherever you go.. One of the most common ways to increase market penetration is by lowering the price of a product or service. There are many ways to increase market penetration. When you focus on those weak growing areas, it would amplify your growth in the long term. Market development is a growth strategy that involves selling your existing products or services to a new group of customers. Disadvantage: Expose Your Weaknesses In addition, creating a marketing strategic plan can also identify your weaknesses as a company and as a business owner. Bedford Square I agree that it can be difficult to create a strong go-to-market strategy for the business owners but not for the professionals. Market penetration is one avenue you can take to achieve this goal. It may catchy and interesting to discuss knowing the needs and wishes of customers. During this process, the cost is usually the main factor that determines the pros and cons of a strategy. Belfast BT2 7ES How Would the Marketing Mix Change at Different Stages of the Product Life Cycle. Though, before deciding to use market penetration strategy, its crucial to understand the advantages & disadvantages and risks it carries. Disadvantages of Market Penetration Strategy. Market penetration is an important tool for companies looking to grow their business. Is it worth investing in the new market and approaching new customers? The whole process would take a minimum of 3 months. It helps companies in the growing period to identify new opportunities and sell their current products in the new unexplored market. It can also lead to faulty marketing decisions if data isn't analyzed properly, and creates unrealistic financial projections if the information isn't interpreted correctly. It helps companies in the growing period to identify new opportunities and sell their current products in the new unexplored market. A market development strategy aims at reaching non-consuming users in currently profitable segments. ), and product development strategy. You may need to borrow money to buy new premises or equipment to expand. Market penetration strategy takes advantage of low prices to increase product demand and increase market share. As a new business owner, there are many questions you'll need to tackle. Increasing your advertising budget can help you reach more potential customers and increase brand awareness. Hence, the marketing strategy has been under fire for using controversial celebrities. It's safer to stick with something that you and your customers already know than to venture into untested territory. A market development strategy really is a mini strategic plan because The bank provides financial companies with its technology platform through the API layer. It gives you an idea of what type of product or service you should develop. Develop the strongest idea possible, and revisit your product development strategy throughout the long process. The below-given equation will help you find out how much of a product or service is used by customers in comparison to its total estimated market i.e. When you have got biased data from your research, then you cant make the right decisions. Make your product more appealing to gain more market share from your competitors customers, Competition is fierce, no matter which business youre in. and market development strategy (luxury vehicles and ride-sharing). 2. 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