business plan market penetration

How to Create a Market Penetration Strategy — 2024 Guide

8 min. read

Updated February 14, 2024

If you’re  looking to start  or expand your business, you need to have a firm understanding of how to enter and grow within your chosen market. This requires you to take what you’ve learned during your market analysis to develop a market penetration strategy for your business. So, what exactly is a market penetration strategy and how do you develop one?

• Market penetration definition

Market penetration is the amount that your business is able to sell a product or service to customers compared to the estimated  total available market  (TAM). This is a measurement that can help you define the serviceable available market (SAM), which is the portion you estimate that you can acquire. Additionally, it can serve as a baseline for developing a strategy to increase your service obtainable market (SOM), or the subset of customers that you can realistically acquire.

• How to calculate market penetration

Market penetration is both a measurement and an activity. You can actively engage in market penetration, which is your attempt to enter or expand into a given market. The actual measurement is a specific assessment regarding how much you anticipate selling or actually do sell as a percentage of the total available market. You can find this measurement using the following equation:

Market penetration rate = (Number of customers / target market size) x 100

While the action and measurement may seem like two separate activities, you can actually leverage your market penetration measurement to develop a market penetration strategy. While it may not be exact, since it’s based on market size estimations, it can still provide you with a legitimate  number to measure  your actual results. 

Think of it as a baseline for what’s feasible and what your penetration rate needs to be for your business to be viable long-term. Keeping track of this measurement and noting any positive or negative changes can help inform your return on investment for any marketing or sales campaigns. To stay up-to-date, it’s best to review this measurement before and after a campaign to gauge performance. You can also add it into your  monthly plan review sessions  if you’re actively running campaigns without a distinct end date.

• Market penetration explained

To truly take advantage of knowing your market penetration rate, you need to understand what that rate means for your business within the market. How does your current standing affect brand perception? How do you  compare to your competitors ? Is there any room for growth? Any threat of new entrants?

In general, you want your market penetration to be high. The higher your market penetration the more likely that you have some or all of the following market advantages:

• You’re an industry or market leader
• You’re well-established in your industry
• You can leverage economies of scale
• You have a stronger pricing position
• Brand awareness for your business is high
• You have well-established distribution channels and vendor relationships

You don’t necessarily need to have the greatest market penetration for your business to be viable. In fact, when you’re just starting out you’ll likely be starting with a minor portion of the market. So how do you  grow your business  and achieve greater market penetration? By using your research to develop a market penetration strategy.

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• What is a market penetration strategy?

A market penetration strategy is a product market strategy whereby an organization seeks to gain greater dominance in a market in which it already has an offering. A subset of this strategy often focuses on capturing a larger share of an existing market through a process known as market development. 

Market development involves the actionable steps you intend to take to expand your attainable market. However, instead of working with customers in your current market, you instead focus on obtaining an underserved, non-buying, or new portion of the market. 

For example, let’s say that you’re a  SaaS company  focused on enterprise-level business email management. It’s a highly competitive space, with well-established brands and similar feature sets, where customer service, pricing, and ease of use are primary advantages. As a new entrant, or established business looking to grow, instead of attempting to claim current enterprise customers from your competitors, you can develop another market segment.

You may see an opportunity to provide a lighter version of your software to smaller businesses. Or by focusing on your collaboration toolset, you can pitch the software to single accounting firms with the intent of rolling it out to the broader chain. Doing this grows your current customer base, expands the available market, and simultaneously improves your brand equity within the enterprise email management market.

• How to create a market penetration strategy

Now, market development isn’t always possible, meaning that you’ll need to still focus on growing your business by acquiring customers already served in a given market. One of the best ways to start developing your market penetration strategy is using the Ansoff Matrix. This tool highlights the possible paths you can take to pursue growth. 

Typically, product development and diversification are the more costly and riskier options, while market development and market penetration are considered to be lighter risk strategies. More than likely, you’ll be leveraging multiple growth strategies within your broader market penetration strategy. But, the path you take does again depend on your current market penetration, competitor positioning, as well as market expectations. 

To make sure you’re prepared to evaluate and execute different strategies, start with a  market analysis  and your penetration rate before working with the Ansoff Matrix. Then start to explore the different market penetration strategies available to you.

• Market penetration strategy examples

As you conduct your market analysis and begin to map out specific steps, here are a few market penetration strategy examples you can try to implement.

Price adjustments

If you’re struggling to move products or services, it may be wise to lower or increase your pricing. This can set your business apart from competitors by either presenting yourself as a low-cost alternative or premium option. You can also explore expanding your  pricing options , creating different levels for specific customer needs that lock unique features or support behind higher tiers.

Keep in mind that any pricing adjustments may also require a certain level of product development, especially if you pursue the premium route.

Launch a new product or service

If you’re considering launching a new product or service, be sure that there is a need for it. Treat this new launch like you’re restarting your business. Interview customers,  conduct market research , forecast sales and expenses, and be sure that a new product is viable for your business. 

As said before, this may stem from your pricing adjustment strategy. If this product or service is similar to your current offerings, be sure that you cleanly separate it with pricing and messaging. If it’s a complimentary product, try to find ways to cross-promote, and improve the lifetime value of current customers.

Adjust your current products

Another option is to simply change or update your current products or services. Start by defining specific  niche segments  within your target market to help define what changes are necessary. This can be a new feature, less expensive components, or unique variants, among other things. 

The key here is to focus on improving economies of scale by leveraging the core components of something that you already sell. 

Partner with or acquire other businesses

Sometimes the market is too competitive to make any real traction. Maybe one business is so large and well-established, that minor or emerging competitors simply cannot strengthen their foothold due to current resources and the smaller customer pool available to them. In this case, it may be wise to partner up or acquire a competitor to unify your customer base and resources. 

This is also an effective strategy when entering a new market. Instead of working from the ground up, your brand will immediately become associated with a business that has a well-established presence. 

Adjust your marketing campaigns

In some cases, you may not need to make such drastic changes to your strategy. Instead, you can always focus on optimizing your current marketing spend. This may be as light as adjusting your messaging within advertisements or offering different incentives. Or something as large as relaunching  marketing campaigns  or creating a loyalty program. 

In any case, this requires you to look closely at  your target audience  and how your competitors position themselves. Is there a pain point no one is addressing? Is your copy and imagery not presenting your mission or value proposition effectively? Or maybe you just aren’t spending enough on the right marketing channels. 

In any case, look at your current return on investment for marketing activities and identify any areas that require optimization. From there, begin to test and layout different strategies, potentially around some of the pricing or feature adjustments we already covered. Continue to look at performance over time and be ready to make gradual adjustments if something isn’t working.

• Connect market penetration to your overall business strategy

Keep in mind that market penetration should not be conducted in a bubble. Any strategies you develop or steps you take should connect to your broader business strategy and help you reach specific  milestones . One way to keep this top of mind is to incorporate a review of your market penetration rate and any ongoing strategies into your monthly plan review. 

This will encourage you to look at  financial forecasts , milestones, and current tactics all at once. If you find that a current penetration strategy doesn’t support your larger goals, it may be wise to back off or reallocate resources until it becomes relevant. Or, it may present an opportunity to adjust your business plan to fit the opportunity you’ve found. But without reviewing it alongside your plan and financials, you’d never know for sure. 

Clarify your ideas and understand how to start your business with LivePlan

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

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What Is Market Penetration?

Understanding market penetration.

• Calculation

Market Penetration for Companies

• Pros and Cons
• Market Penetration FAQs

The Bottom Line

Market penetration: what it is and strategies to increase it.

Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service. Market penetration can also be used in developing strategies employed to increase the market share of a particular product or service.

Key Takeaways

• Market penetration is a measure of how much a product or service is being used by target customers compared to the total estimated market for that product or service.
• Market penetration also relates to the number of potential customers that have purchased a specific company’s product instead of a competitor’s product.
• Market development is the strategy or action steps needed to increase market share or penetration.
• Common market penetration strategies include lowering prices, acquiring competitors, targeting new markets, or introducing new products.
• Companies must be mindful of how market penetration into new areas can jeopardize current relationships with customers, dilute equity branding, and confuse consumers on the company's identity.

Investopedia / Jiaqi Zhou

Market penetration can be used to determine the size of the potential market. If the total market is large, new entrants to the industry might be encouraged that they can gain market share or a percentage of the total number of potential customers in the industry.

For example, if there are 300 million people in a country and 65 million of them own cell phones, the market penetration of cell phones would be approximately 22%. In theory, there are still 235 million more potential customers for cell phones, or 78% of the population remains untapped. The penetration numbers might indicate the potential for growth for cell phone makers.

In other words, market penetration can be used to assess an industry as a whole to determine the potential for companies within the industry to gain market share or grow their revenue through sales. Revisiting our example, the global cell phone market penetration is often used to estimate whether cell phone producers can meet their earnings and revenue estimates. If the market is considered saturated, it means that existing companies have the vast majority of the market share—leaving little room for new sales growth.

Market Penetration Rate

A key component of market penetration is quantifying a company's market penetration. This is done by calculating a firm's market penetration rate (discussed below). A market penetration rate is simply a ratio that compares a company's performance against the total market.

The market penetration rate is especially important because it allows companies to compare where they are currently, where they have been, where they want to be, and how their competitors are performing. The market penetration rate allows a company to set a SMART goal that can be calculated and tracked over time.

How to Calculate Market Penetration

Market penetration can be quantified as a rate that describes what proportion of the market has been saturated by the company. To calculate market penetration, you must know the number of customers a company has secured in addition to the total market size.

Market Penetration Rate = Customers Number TTMS × 100 where: TTMS = Total Target Market Size \begin{aligned}&\text{Market Penetration Rate} = \frac {\text{Customers Number} }{ \text{TTMS} } \times 100 \\&\textbf{where:} \\&\text{TTMS} = \text{Total Target Market Size} \\\end{aligned} ​ Market Penetration Rate = TTMS Customers Number ​ × 100 where: TTMS = Total Target Market Size ​

The number of customers will be each unique customer that the company has secured business with. Some may choose to only use repeat customers to analyze the stronger consumer base. Others may choose any customer that has transacted in a given time period (i.e. over the past five years).

The total market size may be difficult to define, especially if the company has a broad geographical area or sells goods online. The total market size is not necessarily the population of the area; instead, it is the total potential customers the company could have.

An alternative but similar way to calculate market penetration is to focus on dollars as opposed to people. Sometimes, industries may be quoted as having a certain value or sales potential; therefore, companies can compare what they've sold and compare it to this market potential.

Market Penetration Rate = Total Sales Dollars TTMSP × 100 where: TTMSP = Total Target Market Sales Potential \begin{aligned}&\text{Market Penetration Rate} = \frac {\text{Total Sales Dollars} }{ \text{TTMSP} } \times 100 \\&\textbf{where:} \\&\text{TTMSP} = \text{Total Target Market Sales Potential} \\\end{aligned} ​ Market Penetration Rate = TTMSP Total Sales Dollars ​ × 100 where: TTMSP = Total Target Market Sales Potential ​

In this latter formula, a company may care less on the number of customers it has secured. This strategy may be important for companies that are striving to secure the largest customers or biggest market participants. Though they may receive a small market penetration rate when considering the number of people they serve, companies that transact with the largest customers may be in better shape when using the second formula.

Market penetration is often cited as a percentage representing the total share of target customers attracted.

Market penetration is not only used on a global and industry-wide scale to measure the scope and for products and services, but also is used by companies to assess their product's market share.

As a metric, market penetration relates to the number of potential customers that have purchased a specific company’s product instead of a competitor’s product, or no product at all. Market penetration for companies is typically expressed as a percentage, meaning the company's product represents a certain percentage of the total market for those products.

To calculate market penetration, the current sales volume for the product or service is divided by the total sales volume of all similar products, including those sold by competitors. The result is multiplied by 100 to move the decimal and create a percentage.

If a company has a high market penetration for their the products, they're considered a market leader in that industry. Market leaders have a marketing advantage because they can reach more potential customers due to their well-established products and brand . For example, a market leader and manufacturer of cereal will have far more shelf space and better positioning than competitor brands because their products are so popular.

Also, market leaders can negotiate better terms with their suppliers because of their significant sales volume. As a result, market leaders can often produce a product cheaper than their competitors, given the scale of their operation.

Market Penetration Strategies

When a company tries to implement growth strategies, there are often four ways of doing so: developing new markets, diversifying into new products, penetrating existing markets, or developing new products. These four strategies are often depicted in an Ansoff Matrix.

Because the strategies that require new markets or new products are considered riskier, market penetration is often the lower risk option for growth. This is because the market has already been created and can be studied. In addition, the company may already be offering a product or a variation of the product. Using some of the techniques below, a company may experience growth through market penetration.

Change Product Pricing

More likely than not, a company won't be able to increase market share by increasing its price, Though Veblen goods do contradict the law of supply and demand, a company can more likely increase market penetration by lower its prices. This requires the company to sufficiently understand its input costs and profit margins . It also requires an understanding of its consumer base and whether a lower price will attract the audience the company intends to have long-term.

Create New Product

Though market penetration often occurs with existing products, a company may be able to solve a customer's problem in an innovative way with a new good. Though this riskier option does not guarantee market adoption, a company may invest in research and development to study existing products, analyze gaps in value, detect where existing products fall short of consumer expectations, and manufacture a new good.

Target New Geographies

With the proliferation of online sales, many businesses may already have access to wider markets than they realize. However, for service companies may be restricted to one geographic region, the company may employ the market penetration strategy of moving, developing , and expanding to a new area. Without having to leave its original location, the company may be able to fund operations in a new site by leveraging success at an existing site.

Seek Partnerships

Instead of seeking new places to operate, companies may penetrate new markets by seeking new people to work with. Consider the Barnes & Noble and Starbucks partnership. By agreeing to share in the success of internally-operated cafes within bookstores, Starbucks was able to enter into a different market it otherwise would not have had access to.

In the example above, it would have been critical for Starbucks to consider how its brand image integrated with Barnes & Noble. Without careful consideration, customers may have been confused to see it within other types of stores (i.e. consider a Starbucks inside of a Home Depot).

Innovate Existing Product

Though one strategy above entailed creating a new product, sometimes companies simply need to revamp an existing good. This is clearly evident with the frequent releases of updated smartwatches, cellphones, gaming consoles, or other technological devices. With each iteration, a company can simply improve and offer new benefits. Plus, existing customers that have already experienced the old devices may be further inclined to upgrade after a positive experience.

Acquire Other Companies

Though partnerships entail two separate entities temporarily coming together to share in the success, acquisitions result in two separate entities legally joining together. By acquiring a company, the acquirer may instantly have access to new products, markets, labor skillsets, intangible assets like goodwill, or research & development.

Create Promotional Opportunities

For companies that do not want to permanently discount their prices, companies can penetrate markets by offering temporary promotional opportunities. This strategy lures consumers in by attracting them to low prices. Be advised that though this may result in short-term success, it is more likely to lead to the incorrect audience having been attracted, especially if a company strives to be a higher-quality (and therefore higher price) company.

Invest (More) in Sales Representatives

Companies may have everything they need to successfully bring a product to market. However, if they do not have the appropriate staff on hand, their product may falter. No matter how strong a manufactured product is, a company must be able to bring it to the market, communicate its value, and close sales. This may require a company to increase the headcount of sales reps or invest more heavily in stronger talent.

Advantages and Disadvantages of Market Penetration

Pros of market penetration.

For most companies, increasing their market penetration will increase sales. That's because market penetration strategies often entail increasing the number of customers served or more deeply becoming engrained in the larger customers they serve.

Companies may also experience other benefits from market penetration. Market penetration leads to higher visibility of products or services, and markets may begin to better recognize the benefits a company may be able to offer. This allows a company's brand equity to increase, as public perception of a company is most often improved as the company penetrates new markets.

Companies can also leverage successful market penetration by being more strategic with what they offer customers. Instead of being a price taker , companies that have a deeper presence in a market are more likely to be able to set their own price, sale terms, or enhance their products as they see fit. In many ways, market penetration can only occur through product differentiation and being able to convey unique benefits to consumers.

Cons of Market Penetration

Though market penetration may improve operations, it also has the risk to backfire. When companies seek out new markets or offer new products, it always runs the risk of diminishing their existing image, creating wrong public perceptions about their company, or attracting a client base that does not align with their strategic plan. As products become less popular, companies may be forced to liquidate products by selling them at a discount if they no longer resonate with consumers in markets they penetrated.

Though companies often perform market segmentation to attempt to attract the right customers, market penetration may increase the risk of the wrong customers being served. This can be detrimental to a marketing plan that strives to cater to a certain customer willing to pay certain prices for a certain quality of goods. Should Apple accidentally attract consumers who want to pay the lowest prices in the market, it will face a dilemma in trying to retain those customers or shifting its marketing plan.

Market penetration may also sound like a single instance of garnering deeper market presence, but it is actually a company-wide strategy that requires everyone to be on the same page about. Consider how the manufacturing, warehousing, procurement , or selling departments may not be aligned. This puts undue pressure on some departments that may need to play catch-up as markets are penetrated.

Market Penetration

Often leads to greater financial success through increased sales

Often leads to greater financial success through greater quantities of customers

Improves product visibility as more consumers are exposed to a company's goods

Improves a company's brand equity if the goods are appropriately received by the market

May cause confusion about how one product relates to another

May cause the company-wide image to falter if the wrong type of consumer is attracted

May force a shift in marketing strategy if a different audience is attracted

Requires all departments to be aligned; otherwise, undue pressure will cause certain departments to struggle

Example of Market Penetration

By the fourth quarter of 2017, Apple Inc. ( AAPL ) had amassed a market share of more than 50% of the smartphone market throughout the world. Apple has consistently introduced new versions or their iPhones with added enhancements and upgrades, including releasing its high-end iPhone X. As a result of its market penetration, Apple has a larger market share than all of its competitors combined.

However, the company still has opportunities to add to its customer base by targeting its competitors' clients and woo them over to Apple products and services.

Why Use Market Penetration Strategies?

Market penetration strategies are used to ultimately increase the number of customers and sales dollars of a company. Market penetration is the act of gaining a deeper presence in a market; by employing strategies to increase how deep a company is engrained in a market, that company often has greater short-term and long-term financial health, is better in tune with what its customers want, and is often better positioned compared to its competition.

What Is the Difference Between Market Penetration and Market Share?

Though both terms are used interchangeably, market penetration and market share are different. Market penetration is often used to describe just the percentage of target audience a company sells to, while market share takes a more holistic approach and looks at the percentage of the total addressable market a company sells to.

Does Market Penetration Increase Market Share?

Because market penetration is a more specific measurement of how much of a given market a company sells to, increasing market penetration often increases market share potential. For example, consider Apple moving into the smartwatch industry. Not only does this increase its market penetration potential, it is now part of an entirely new market and could potentially land parts of this new market share.

Market penetration is a measurement of how much of a product is used compared to a company's target audience. There's a number of strategies a company can use to increase its market penetration including change its pricing, marketing, manufacturing, or operating strategies. A company must be mindful to be stay true to its target audience and broadly communicate penetration strategies across the company.

Strategy Analytics. " Apple iPhone Takes Huge 51 Percent Share of Global Smartphone Revenues in Q4 2017 ."

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Market Penetration Strategy 101: How to Calculate & Best Strategies

Market penetration can elevate a business to new levels by tapping into existing products in current markets. This article will delve into what market penetration is, how it’s calculated, and the optimal strategies to achieve it. Whether you’re a startup or an established enterprise, understanding market penetration can help enhance market share and drive success.

What is Market Penetration?

Market penetration is a business growth strategy where companies aim to increase their market share of existing products or services in existing markets. Market penetration is crucial for businesses looking to solidify their presence in an industry and build a robust customer base.

This is done by selling more products or services to current customers or by finding new customers within existing markets. It can be achieved through various tactics like pricing strategies, advertising, sales promotions, and product improvements or innovations. The primary goal of this strategy is to increase market share, revenue, and customer loyalty within a market where the products or services are already available.

The degree of market penetration can be an indicator of the brand’s popularity, business growth, and the level of risk involved. It’s crucial for evaluating the success of products and services in the market and is also a critical factor in developing effective marketing strategies and plans.

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How is Market Penetration Calculated?

Market Penetration is calculated to understand the existing sales or market share of a company in comparison to the total market potential. It provides insights into how much of the potential market a company has been able to capture.

Formula for Market Penetration Rate

Actual Market Size is the current market share or sales volume of the company.

Total Addressable Market (TAM) represents the total sales revenue opportunity available for all companies in a particular market.

Let’s say a company sells 500 units annually in a market where 10,000 units are sold in total by all competitors. The Market Penetration Rate would be:

This calculation implies that the company has captured 5% of the total market.

Additional resources:

• Total Addressable Market Template – In order to help calculate your market share and your potential to build a large business, it helps to calculate and understand the total addressable market and sensitivity analysis. Check out our free total addressable market template below
• When & How to Calculate Market Share (With Formulas)

Suggest Market Penetration Rate for Startups

Once you’ve calculated the market penetration rate, it’s essential to analyze it in context. A high rate may indicate a strong market presence but may also suggest market saturation, limiting growth. A lower rate can point to significant growth opportunities, but it could also reflect poor market fit or strong competition.

Companies often use market penetration metrics alongside other market analysis tools and industry benchmarks to develop effective market strategies and identify growth opportunities.

For startups, achieving a market penetration rate of 2-3% is often considered commendable, and it can serve as a strong foundation for further expansion and growth.

8 Best Market Penetration Strategies

To achieve greater market penetration, various strategies can be implemented. The selection depends on the business model, industry, and target audience. Below are eight effective market penetration strategies:

1) Dynamic Pricing

Dynamic Pricing can be a powerful tool for companies looking to penetrate existing markets more deeply. It is a strategy where companies adjust the prices of their products or services in real-time, or near real-time, in response to market demands, competitor prices, and other external factors.

This strategy can be pivotal in achieving higher market share in existing markets as it allows businesses to quickly adapt to market conditions and customer behaviors.

By adjusting prices to meet market conditions and consumer expectations, businesses can optimize their sales and profits, attract more customers, and enhance their market share. However, it’s crucial to manage this strategy carefully to maintain customer trust and satisfaction.

How It Works:

Dynamic Pricing leverages advanced technologies and algorithms to analyze multiple factors that influence demand, including seasonality, competitor prices, inventory levels, and consumer behavior. Based on this analysis, prices are adjusted to optimize sales, revenue, or margins.

• Maximizes Revenue: Enables businesses to adjust prices to meet demand, maximizing revenue during high demand and possibly stimulating sales during low demand.
• Competitive Advantage: Allows for real-time response to competitors’ pricing strategies, helping companies stay competitive in the market.
• Optimizes Inventory: Helps in managing inventory more effectively by increasing prices when stock is low or decreasing prices to move surplus inventory.
• Customer Segmentation: Offers the possibility to segment customers and offer different prices based on customer willingness to pay, optimizing revenue and customer satisfaction.
• Market Responsiveness: Provides the flexibility to quickly respond to market conditions like changes in demand or supply, ensuring optimal pricing at all times.
• Customer Dissatisfaction: Customers may perceive dynamic pricing as unfair, especially if they find out they paid more for the same product or service than others, potentially leading to loss of trust and customer churn.
• Complex Implementation: Requires sophisticated software, algorithms, and expertise to analyze data and adjust prices accurately and effectively, which can be resource-intensive.
• Brand Image Risk: Frequent price changes, especially upward revisions, can lead to a negative brand image and accusations of price gouging.
• Price Wars: Can lead to destructive price wars with competitors, resulting in decreased profit margins for all market players.
• Legal and Ethical Considerations: In some industries and jurisdictions, there may be legal restrictions and ethical considerations around dynamic pricing, and violating these can lead to fines and reputational damage.

2) Adding Distribution Channels

Adding distribution channels refers to the strategy of increasing the number of ways or locations through which customers can access and purchase a company’s products or services.

By making products or services available through a variety of channels, companies can reach a broader audience, adapt to customer purchasing preferences, and ultimately increase sales and market share within existing markets. This strategy requires careful planning and management to ensure consistency in brand image and customer experience across all channels.

• Increased Sales: Access to more customers through varied channels can lead to higher sales and subsequently, increased market share.
• Enhanced Market Coverage: More channels mean broader market coverage, enabling the business to reach different customer segments and geographic locations within the existing market.
• Customer Convenience: Providing multiple purchasing options caters to diverse customer preferences, potentially improving customer satisfaction and loyalty.
• Risk Diversification: Distributing through various channels reduces dependency on one, mitigating risks associated with the underperformance of a single channel.
• Brand Visibility: Presence across multiple channels enhances brand visibility and awareness, contributing to brand equity.
• Complex Management: Managing multiple channels can be logistically complex and administratively challenging, requiring additional resources and efforts.
• Inconsistent Brand Image: Maintaining a consistent brand image and customer experience across varied channels can be challenging, potentially affecting brand perception.
• Channel Conflict: Different channels might compete against each other for the same customers, leading to potential conflicts and affecting relationships with channel partners.
• Reduced Profit Margins: Some channels might require price reductions or additional expenditures, such as commissions for third-party sellers, impacting profit margins.
• Customer Confusion: Offering products through too many channels, especially with varied pricing or promotional offers, can confuse customers and dilute the brand value.

When adding distribution channels, companies need to strategically assess the potential impact on the brand, customer experience, and overall business operations. Proper integration, management, and consistent monitoring of all channels are crucial to addressing the challenges and reaping the benefits of this strategy. Balancing the added complexity with the potential advantages is key to successful implementation and sustainable growth in market penetration.

3) Geo-Targeting Specific Locations

Geo-targeting specific locations involves tailoring your marketing and sales efforts to target customers in a specific geographical area or region. This technique is often utilized by businesses to focus resources on areas where they are likely to gain the most traction, allowing them to reach and serve customers more effectively and efficiently.

Geo-targeting can be implemented using various tools and platforms like online advertising services, SEO, and social media, which allow businesses to specify the geographic locations they want to target. Additionally, analytics and data analysis can help in identifying the most lucrative regions to focus on.

• Enhanced Personalization: Allows for more personalized and locally relevant marketing campaigns, improving engagement and conversion rates.
• Resource Optimization: Focuses resources and efforts on high-potential or high-performing regions, ensuring better utilization and improved ROI.
• Improved Customer Experience: Offering localized content, deals, and products caters to regional preferences and needs, leading to higher customer satisfaction and loyalty.
• Market Insight: Provides valuable insights into regional market trends, consumer behavior, and preferences, aiding in better decision-making and strategy formulation.
• Competitive Edge: Establishing a strong presence in specific locations can provide a competitive advantage, especially in areas with less competition.
• Limited Reach: Focusing on specific locations might limit the overall reach of the business, potentially missing out on opportunities in other regions.
• Resource Intensity: Developing localized strategies and content can be resource-intensive and might require significant investment in research and adaptation.
• Market Variability: Different regions may exhibit varying demand patterns, requiring constant adjustments and refinements to the targeting strategy.
• Cultural Sensitivity: There’s a risk of misunderstanding local cultures and preferences, which might lead to ineffective or even offensive campaigns.
• Data Privacy Concerns: The use of location data can raise privacy concerns and regulatory issues, potentially leading to legal challenges and reputational damage.

4) Continuous Improvements of Products

Continuous improvements of products refer to the ongoing effort to refine and enhance products based on customer feedback, market demands, technological advancements, or competitive dynamics. This strategy is crucial in market penetration as it helps in maintaining and enhancing the appeal of the products, addressing evolving customer needs, and staying competitive in the market.

• Increased Customer Satisfaction: Addressing customer needs and resolving issues lead to higher satisfaction and loyalty.
• Enhanced Market Position: Ongoing improvements help in maintaining a competitive edge and solidifying market presence.
• Revenue Growth: Enhanced features and quality can justify higher pricing, leading to increased revenue.
• Brand Strengthening: Demonstrating commitment to excellence and innovation enhances brand reputation and equity.
• High Costs: Constant refinement and development can be resource-intensive and costly.
• Overcomplication: Adding too many features or making too many changes can complicate the product, potentially alienating users.
• Customer Overwhelm: Frequent changes and updates can overwhelm and frustrate customers, especially if they are not well-communicated.
• Market Misalignment: Without proper market research, improvements may not align with actual customer needs, leading to wasted resources and missed opportunities.

5) Launch a New Product or Rebrand

Launching a new product or rebranding refers to the introduction of a novel product or a significant transformation of existing brand elements, respectively, to appeal to the current market. This can be a pivotal market penetration strategy, aiming to renew consumer interest and address evolving market demands, preferences, and competition.

• Increased Market Share: New or revitalized offerings can attract a wider audience and capture additional market segments.
• Enhanced Brand Image: A successful rebrand can modernize and elevate the brand’s image, improving perceptions and attractiveness.
• Revenue Growth: New products and improved brand image can drive sales and potentially allow for premium pricing.
• Adaptation to Market Changes: Enables the business to stay relevant and responsive to evolving market trends, demands, and consumer expectations.
• High Risk and Uncertainty: The success of a new product or a rebrand is not guaranteed and may not resonate with consumers, leading to financial losses.
• Substantial Investment: Development, launch, and rebranding processes can be costly, involving substantial investment in research, marketing, and implementation.
• Potential Customer Alienation: Existing customers may react negatively to significant changes in products or brand identity, potentially leading to loss of loyalty.
• Implementation Challenges: Executing a rebrand or launching a new product involves logistical, operational, and strategic challenges, requiring meticulous planning and coordination.

6) Build Relationships With Business Partners

Building relationships with business partners involves creating and nurturing mutually beneficial connections with other businesses, suppliers, distributors, or stakeholders in your industry. This strategy is crucial in market penetration as it can open up new avenues for growth, co-development, and expansion, allowing businesses to leverage collective resources, networks, and expertise to enhance market presence.

• Expanded Reach: Access to partners’ networks and resources can significantly extend market reach and presence.
• Increased Innovation: Collaborative efforts can lead to innovative solutions and offerings, enhancing competitive advantage.
• Cost Efficiency: Sharing resources and responsibilities can lead to reduced operational costs and increased efficiency.
• Enhanced Learning: Exposure to partners’ expertise and insights can lead to valuable learning and growth opportunities.
• Potential Conflicts: Divergent goals, values, or management styles can lead to conflicts and strains in partnerships.
• Dependence Risks: Reliance on partners can pose risks in case of disagreements, underperformance, or termination of partnerships.
• Loss of Control: Collaborations may require concessions and shared decision-making, potentially leading to loss of control over certain aspects of the business.
• Resource Diversion: Managing partnerships can be resource-intensive and might divert focus and resources from core activities.

7) Buy a Smaller Competitor in Your Industry

Buying a smaller competitor, also known as acquisition, refers to purchasing another company to control its assets and operations. This market penetration strategy can be powerful, as it allows a company to quickly increase its market share, expand its product or service offerings, and eliminate competition.

When considering acquiring a smaller competitor, thorough due diligence is paramount to assess the compatibility, valuation, and potential synergies accurately. A well-planned integration strategy, clear communication, and cultural alignment are crucial for realizing the full benefits of the acquisition and ensuring smooth transition and consolidation, thus enhancing market penetration and long-term success.

• Rapid Market Expansion: Provides immediate access to new market segments, geographic areas, and customer groups.
• Enhanced Resources and Technologies: Acquisition brings in additional resources, technologies, and intellectual properties, enhancing overall capabilities.
• Cost and Revenue Synergies: Merging operations can lead to cost savings and additional revenue opportunities, increasing profitability.
• Strategic Positioning: Reducing competition and leveraging combined strengths can strengthen market positioning and dominance.
• Integration Challenges: Merging different corporate cultures, systems, and operations can be complex and challenging.
• High Costs and Risks: Acquisition involves significant financial investment and carries risks of overvaluation and unanticipated complications.
• Potential Culture Clash: Differences in organizational cultures and management styles can lead to conflicts and employee dissatisfaction.
• Regulatory Hurdles: Acquisitions may be subject to stringent regulatory scrutiny and approval, potentially impacting the feasibility and timelines.

8) Provide a Rewards Program or Promotional Program

Providing a Rewards or Promotional Program refers to offering incentives like discounts, points, or special offers to customers to encourage loyalty, repeat business, and attract new customers. These programs are instrumental in market penetration as they help in increasing product or service usage among existing customers and drawing in new clientele.

When implementing rewards or promotional programs, it is important to balance the incentives with the overall business strategy and ensure that the programs are sustainable, beneficial, and aligned with brand values. A well-crafted and managed rewards program can be a powerful tool for market penetration, building long-lasting relationships with customers, and creating a competitive advantage in the market.

• Increased Sales: By incentivizing purchases, such programs can drive up sales volumes and revenues.
• Customer Data Collection: These programs often involve collecting customer data, which can be analyzed to gain insights into consumer behavior and preferences.
• Enhanced Customer Satisfaction: Customers receiving rewards or benefits are likely to be more satisfied and have a positive perception of the brand.
• Effective Word-of-Mouth Marketing: Satisfied customers, especially those benefiting from rewards, are more likely to recommend the brand to others.
• Cost Implications: Implementing and maintaining rewards programs can be costly, impacting profit margins.
• Customer Expectation Management: Customers may come to expect regular promotions, potentially impacting perceived value and full-price sales.
• Complexity in Management: Designing, managing, and optimizing rewards or promotional programs can be complex and resource-intensive.
• Risk of Decreased Perceived Value: Regular and extensive promotions can lead to a devaluation of the product or service in the eyes of consumers.

Raise Funds and Penetrate Your Market With Visible

Market penetration is a pivotal strategy for businesses aiming to enhance their market share in existing markets with existing or innovative products. Whether it’s through employing dynamic pricing, adding distribution channels, geo-targeting, continually improving products, launching new products or rebranding, forging business partnerships, acquiring smaller competitors, or providing compelling rewards or promotional programs, each strategy carries its unique set of advantages and challenges.

The key is to meticulously analyze and integrate these strategies, aligning them with the overarching business objectives, customer needs, and market dynamics, to drive sustainable growth and success. Leveraging such multifaceted approaches can aid in navigating the competitive landscape, fostering customer loyalty, and achieving a robust market presence, propelling your business to new heights. And, to successfully penetrate the market, raising funds effectively is crucial—discover how Visible can assist in making your fundraising journey seamless and successful.

• Jul 15, 2023

What Is Market Penetration Strategy? (Definition and Examples)

If your SaaS startup is looking for low-risk business growth strategies, creating a market penetration strategy should be one of the first things you think about. Although, before moving forward, it’s important to identify a clear definition of market penetration as it relates to SaaS and gain a better understanding of what market penetration strategy is by taking an in-depth look at some common examples.

Market Penetration Defined

Market penetration can have two different meanings. Explained in detail below, market penetration can be defined as either a measurement or an activity. In this article, we will review both market penetration definitions and how they relate to SaaS.

Market penetration definition 1 - a measurement

A business' market penetration measures how much their product is being sold relative to the total estimated market for that product, expressed as a percentage. This is also known as market penetration rate.

How to calculate market penetration rate

If you know your total addressable market (TAM), you can calculate market penetration rate with this formula:

Market penetration rate = (number of customers ÷ target market size) x 100

Establishing market size can be tricky depending on the nature of your SaaS product, as a potential customer base could be global and essentially target “everyone.” The more granular you can get with your ideal audience demographics, the easier it will be to make this calculation.

What’s a good market penetration rate for a tech business?

It’s suggested that average market penetration for a consumer product is 2 to 6%, while business products (B2B) can range anywhere from 10 to 40%. If your SaaS solution captures 10% of your TAM, for example, you’ll probably be doing quite well!

Let's take look at the smartphone industry to see how market penetration rates and market share can change:

As of Q2 2023 global leaders Apple and Samsung had a combined market penetration rate of 37%, with Apple coming in second at 17% and Samsung capturing the top spot with 20%. Five brands captured almost 80% of the global 5G smartphone market. A range of smaller brands (more than 100) take the remainder of the market share to its 100% completion.

Two of the top ten smartphone brands, Tecno and Infinix, have seen double digit growth in annual sales, while other top brands saw a decline — Apple experienced the smallest decline of the top five market leaders.

It's a tough market to compete in traditionally, but there are opportunities for the taking!

The market leaders offer premium priced products that keep getting more and more expensive without much innovation to justify the ever-increasing price tag, and that opens the door for savvy competitors to penetrate the market.

Market penetration definition 2 - an activity

Market penetration defined as an activity (see the Ansoff Matrix below) is the process of going to market with a product in an existing market in which current or similar products already live and taking market share from the other competing companies. This is also known as a market penetration strategy.

The Ansoff Matrix

The term market penetration (defined as an activity) stems from the Ansoff Matrix, developed in 1957 by Igor Ansoff, which helps companies plan their strategies for future growth. The Ansoff Matrix is a 2X2 matrix representing four different business growth strategies in which a company either enters a new or existing market, and with either new or existing products.

Market Penetration Strategy

Market penetration strategy is one of the four business growth strategies identified in the Ansoff Matrix, the other three being market development strategy , product development strategy , and diversification strategy . Market penetration strategy refers to when a company attempts to grow using existing products in existing markets, as shown in the bottom left quadrant of the matrix graphic above.

A low-risk market entry and growth strategy for tech startups

A market penetration strategy carries a low amount of risk — it's an ideal SaaS growth strategy often used by early-stage and bootstrapped startups, or those unwilling to invest heavily in riskier endeavors.

In other words, the company plans to increase revenue by growing its customer base in a market where similar products exist, gaining market share little by little and taking business away from competitors.

Growing in an established market is a relatively safe bet, because it means there is already a need for your products or services. However, it requires implementing smart product positioning , pricing, user experiences, and marketing tactics in order to compete and grow alongside dominant companies in the market.

How to develop a market penetration strategy

When you’re thinking about creating your market penetration strategy and increasing your market share, you’ll need to consider the different ways you can drive sales revenue from the customers out there in your market using your existing SaaS offering.

This can be accomplished with the following tactics:

Lowering prices, raising prices , or offering tiered solutions

Acquiring a competitor in your market

Revamping your digital marketing roadmap to increase brand awareness

Modifying your products  or to specifically solve your customer’s problems

Put simply, you need to acquire more customers and revenue by making your product more appealing to potential buyers in the market. Let's dive deeper into how you can do that.

SaaS Market Penetration Strategies

1. Price competitively to take additional market share

Pricing is one of the main tactics that SaaS startups use to penetrate a market and grow their revenue. These adjustments can be easily measured to determine their level of success, too.

Did market share increase or decrease when you moved from monthly subscriptions to annual contracts?

How many new customers were acquired after you launched your new pricing plan?

Does lowering your subscription prices help lure customers away from your competitors?

Price drops works well in competitive niches where consumers are typically buying based on the cost of a product. After looking at your competitors and comparing your product and services, adjust your SaaS pricing strategies in order to increase your market penetration rate.

2. Increase your marketing and sales efforts

Changing tactics or becoming more aggressive with your marketing campaigns can help to increase awareness of your SaaS startup in the market. Competitors’ customers can't make the switch and sign up for your product if they don't know it exists, after all.

Marketing can also help persuade your existing customers to stick with you instead of leaving for the competition. Loyalty programs, power user features, strategic alliances , and finding unique ways to deliver value to your users can all help you retain customers . If your users have a stellar experience with your product, they’ll also be more likely to promote you through word-of-mouth, which in turn helps increase your market share.

3. Acquisitions and mergers

If you can’t beat ‘em, join ‘em. Or rather, buy them out. Acquisition as a market penetration strategy is almost as old as business itself. Buying a company in your industry means you’re essentially buying the customer base and the market share that it brings with it – or alternatively, you can buy the competition and then shut them down altogether.

If you’ve got the motivation and the budget, acquisition can be an effective tactic. If you’re in startup mode, acquisition is probably not in your ballpark just yet. In this case, you could look into strategic mergers with partners or similar companies in order to capture their audience and widen your market by doing so.

If you need capital to capture more of your market,

Consider lighter capital's non-dilutive startup financing ➔, 4. make changes to your product.

Listening to your customers and keeping track of what competitors’ customers are saying can help you pinpoint essential features and functions that really add value. A slight adjustment to your product could make all the difference in terms of your market penetration rate by giving the market what they need but can’t get from any other company.

Real-World Examples of Successful Market Penetration Strategies

Acquisition is huge in the SaaS world — industry giants like Facebook and Microsoft regularly snap up smaller companies in order to expand their businesses and further penetrate markets.

Diet Coke was a huge hit, but it attracted primarily female consumers. Coca-Cola’s solution? Coke Zero , which is essentially the same in terms of taste and benefits, but squarely positioned and marketed to capture the male market they were missing.

Samsung is well known for its penetration pricing strategy . By offering its phones at a lower entry price with more pricing tiers, it aggressively lured consumers away from Apple to dominate the global smartphone market.

Penetrate your market and accelerate business growth

A successful market penetration strategy requires selling more of your SaaS product into an existing market in order to gain more of your competitors’ customers and ultimately increase your market share.

With careful analysis of competitors, ample customer research, and some clever promotional ideas your SaaS startup can slowly start to gain dominance in an existing market, but often there's only so far you can grow under your own steam.

Small injections of capital can help you scale up, jump on opportunities, and reach growth milestones faster, which is the kind of traction you need to eventually become a market leader — you don't have to spend months pitching VCs and selling the company you worked so hard to build, either.

Learn more about Lighter Capital's founder-friendly funding options and get money to grow, plus a whole lot more ➔

• SaaS Growth
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What is a market penetration strategy?

Market penetration strategy: A short Intro

Imagine standing at the edge of a vast, undiscovered territory brimming with potential and promising rewards. That's precisely the feeling of penetrating a new market or expanding within an existing one. But, to embark on this journey, you need a well-defined roadmap - a market penetration strategy.

Simply put, a market penetration strategy is an actionable plan a business uses to increase its product or service footprint within an existing market or a new one. The plan typically encompasses pricing tactics, marketing, sales strategies, and various promotional techniques, aiming to grow the customer base.

Understanding market penetration strategies

A market penetration strategy is not a one-size-fits-all solution. Instead, it's a multi-dimensional plan that varies from business to business, depending on factors like the nature of the product or service, competitive landscape, target audience , and available resources.

Effective market penetration strategies often involve competitive pricing, product improvements, increased marketing efforts, or even acquisitions. The choice between these strategies would depend on your business goals and market research.

Advantages of market penetration strategies

A market penetration strategy is not merely an advantage - it's a business necessity. A well-planned strategy offers several benefits:

Market dominance: With a well-executed strategy, businesses can significantly increase their market share, enhancing market dominance.

Economies of scale : As your market share grows, so do your opportunities to benefit from economies of scale. This, in turn, can lead to improved profit margins.

Customer loyalty : Successful market penetration strategies help foster customer loyalty, providing a firm customer base that acts as a bulwark against market fluctuations and competition.

Successful companies that have used market penetration strategies

Every successful company has, at some point, implemented a form of market penetration strategy. Let's look at two iconic examples:

Netflix launched its online streaming service with a strategic focus on a broad content library, competitive pricing, and a user-friendly interface. Their one-month free trial offer was a game-changer, significantly increasing their user base and market share.

Apple used a market penetration strategy to introduce the iPhone. They positioned their product as a premium, user-friendly, and innovative alternative to existing smartphones. Despite the high price point, their strategy led to substantial market share growth, making them a dominant player in the smartphone industry.

Developing a market penetration strategy

There are many ways to develop a market strategy. Here is a quick guide that you can refer to when building your own strategy:

1. Identify your target market Understand your target audience's demographics, behaviors, needs, and pain points.

2. Analyze your competition Identify your competitors , understand their strategies, and find their weaknesses you can capitalize on.

3. Set clear goals Define what you want to achieve, whether it's a specific sales target, a percentage of market share, or a certain number of new customers.

4. Develop your Unique Selling Proposition (USP) Determine what sets your product or service apart from the competition and focus on this in your marketing efforts.

5. Establish pricing and promotion strategies Based on your USP, set a pricing strategy (competitive pricing, penetration pricing, etc.) and develop promotional strategies to boost visibility and attract your target market.

6. Decide on distribution channels Whether it's direct selling, online selling, or selling through intermediaries, choose the most effective and efficient way to get your product or service to your customers. Use the Marketing Funnel Template to help you with this task.

Final act: Putting your strategy into action

After devising a strategy, it's time to implement it:

Create a timeline Set a specific timeline for each step of your strategy.

Allocate resources Ensure you have the necessary resources (human, financial, technological) to carry out your plan.

Communicate your strategy Inform all stakeholders about the plan, roles, and expected outcomes.

Monitor and adjust Regularly check your strategy's progress and make adjustments based on market response and feedback.

Review and learn After implementation, review the strategy, identify what worked and what didn't, and use these insights to improve future strategies.

Remember, a robust market penetration strategy provides a clear path to your business goals. As you navigate the dynamic market landscape, stay flexible, ready to learn, adapt, and adjust as needed.

Discover more

What are Porters Four Competitive Strategies?

How to do a risk assessment?

What is gap analysis?

Cost benefit analysis

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Events — 09 May 2023

What Is Market Penetration Strategy

What Is Market Penetration Strategy? 12 Tips You Must Know

Looking to grow your business and boost your ecommerce conversion rates ? Already working in a competitive market but don’t know where to start? The key to gaining traction with a whole lot of competition out there lies in your market penetration strategy. 

What exactly is market penetration and how can your business go about achieving it? Well, that’s exactly what this article covers. From definitions to strategies, we’re about to tell you everything you need to know about developing an amazing market penetration strategy. So, without further ado, let’s get down to it.

Image Source

What is market penetration?

Market penetration can be defined in two ways:

• As a process
• As a measurement

When we think of market penetration as a process , it refers to the act of taking a new product or service to market within an existing market in which similar products or services already exist. The act of penetrating that market is to take a portion of the market share from the other businesses competing in that market. 

Market penetration can also be understood as a measurement. Market penetration as a measurement refers to the amount of a product or service that is sold as a proportion of the total market size. This measurement helps brands work towards increasing potential market share. 

What is a market penetration strategy?

So, that’s what market penetration is but what makes up a market penetration business strategy? In other words, how can businesses and organizations go about achieving good market penetration? At its most basic, a market penetration strategy is a type of growth strategy. A market penetration strategy is a business’s plan for how to work towards attaining a higher market share within an existing product market. 

The aim is to aid business growth, sales, and competitiveness against similar competitors in the space, becoming market leader. The key differentiator here that sets market penetration aside from other growth strategies is that market penetration is all about growing and positioning yourself competitively in an existing market, not a new market. 

Later on, we’ll be sharing the top market penetration strategies and techniques with you, but first, let’s make sure we’ve really understood what market penetration is about. 

The difference between market share and market penetration

Oftentimes people use the terms market penetration and market share interchangeably. But they are not exactly the same thing. 

Market penetration , as a measurement, refers to the percentage portion of a business’s target market that they capture over a set period of time. 

Market share , by contrast, refers to the percentage portion of the total market value that is captured by a business over the same set period of time. 

What is penetration rate?

We can calculate market penetration as a measurement by using this equation:

Image Created by Writer

The more accurately you can assess your number of customers and market size (TAM) the more accurate your Market Penetration Rate calculation will be. This is not always easy. Especially if your target market is quite broad and widespread. In cases like these it’s often best to hone in on your most relevant target market and take it from there. 

Average market penetration rates vary depending on the type of product being marketed. In general, consumer products realize market penetration rates of between 2% and 6% whereas business products tend to penetrate the market at a rate of between 10% and 40%. 

Ways to boost market penetration

All businesses want to achieve high market penetration rates to remain competitive within their target product market. Fortunately, this doesn’t have to come down to just sheer luck. There are targeted approaches that businesses can take to boost their levels of market penetration and sustain long-term growth year on year. Let’s take a look at some of these below. 

Price adjustments pricing to appeal to new audiences

One way in which businesses go about boosting their market penetration rates is to mobilize a targeted pricing strategy. Adjusting product and service pricing scales up and down periodically means that your products have the opportunity to appeal to different audiences. This technique is a well-known marketing diversification strategy that goes by the name of penetration pricing. 

Typically this involves lowering prices when they are first launched to attract a wider pool of new customers who might otherwise be priced out. Whilst the price is low, it’s easier to penetrate the market, build brand awareness, and gain customers from the competitors also selling in that space. Hopefully, once customers get to know and love your product, some of them will keep purchasing even once the price rises to the normal RRP. 

Channeling further investment into marketing

Another tried-and-tested way to boost marketing penetration is to invest more funds into your marketing campaigns. By employing an omnichannel market development strategy

 and making sure that your brand messaging, voice, and image is just right, you’ll generate increased interest, engagement, and trust in your brand that is more than likely going to increase your market share and entice some customers away from the competition. 

Once you’ve launched your marketing campaign, don’t forget to make use of all that data. Collating all those metrics from disparate channels can seem like an impossible task, but it really need not be. Tools like Affise BI help you manage all that unstructured data across different marketing channels intuitively. You don’t need any technical expertise to benefit from Affise BI and start making better, evidence-based business decisions every day.  

Updating your product 

Market penetration is all about acquiring more of your market and that means acquiring customers from your direct competitors. In order to entice people who are already loyal to your competitors over to your business, you’ll need to differentiate your products from the competition. 

This means making your products a little bit different, or in some way better. By offering the most innovative and attractive products and services in your space, you’ll win new customers and increase your market share in the process. 

Acquisitions or partnerships with other companies in your space

Sometimes teamwork is the key to success. Mergers, acquisitions, and partnerships with other companies sharing the same market space can help businesses grow. You’ll benefit from their brand reputation and ready-made customer following. 

This kind of collaboration is a great way to achieve rapid growth and expansion. The best partnerships exist between companies that each have something to offer one another. Perhaps you have a product feature that your partner wants to add to their product line in the future (and vice versa). Hey presto, you’re helping each other grow and expand in your product space. 

Using a tool like Affise Reach can help you find the perfect business partner. Once you have, ensure that you’re equipped to effectively share data between your respective systems. After all pooling information is what partnerships like these are all about, right? Affise’s data transfer platform, CPAPI , makes it super easy to transfer, synchronize, and automate data connectivity between systems and will help you start building brand awareness from day one.

12 market penetration strategies you must know

Before we set you off on your very own market development campaign, let’s make sure we’ve got all the groundwork covered. Before taking a company’s product to market it’s important to set aside some time to develop a robust market penetration strategy. Once you’ve established your key goals and aims, identify the processes that are going to help you get there. 

Not sure where to start? 

No problem, these 12 market penetration strategies will help you get off to the best start possible. 

1. Lower prices

We’ve already discussed how bringing new products to market at a lower-than-average price point can help boost market penetration. But that’s not the only way to achieve success. Pricing is one of the single most important factors influencing market movements, so it’s important to remain on the ball at all times. 

Stay abreast of your competitors’ products and pricing strategies and ensure that your products and services are always priced competitively for optimum market penetration. 

Pricing techniques that help increase market penetration include:

• Price drops – if your product isn’t gaining traction in a competitive market, entice customers over with low prices.
• Payment plans – if you’re offering a service with a monthly subscription fee, look at the data and identify whether monthly or annual payments are best for your market share. 

2. Discounts & promotions

As well as adjusting your standard pricing, it’s worth devising some targeted discounts, offers, and incentives that will encourage prospects to engage with your brand over your competitors. 

There are so many different types of offers out there from buy-one-get-one free deals (BOGOF) to flash sales and product giveaways. The possibilities are endless. Offering something as seemingly benign as free shipping could be enough to close those first sales. 

Popular discount and offers that help increase market penetration include:

• Discounted products
• Competitions
• Flash sales
• Loyalty rewards
• Free shipping 
• One month free 

A great way to structure your discounting strategy is to use the FIFO method. FIFO stands for first-in-first-out. In other words, when it comes to inventory, you want the oldest items in stock to be the first to go. If stock is proving hard to shift, it’s worth applying a discount to existing products in order to help them move off the shelves faster and boost sales volumes.  

3. Aggressive advertising

Advertising is critical to achieving good market penetration. When companies launch products into competitive and already saturated markets they often fall on aggressive marketing techniques as a way to reach the broadest market segments possible. 

The advertising techniques you choose will depend on the type or product or service that you are offering. In general, it’s best to combine a range of different advertising mediums to establish the greatest reach. Digital advertising is a must, but you may also wish to utilize some traditional ad forms too. Let’s take a look at some of the best options at your disposal. 

Traditional advertising techniques:

• Television media 
• Billboards 
• Flyers 
• Newspaper/magazine ads

Digital advertising techniques:

• Paid-per-click (PPC) ads
• Social media ads
• Content marketing
• Email marketing
• Mobile marketing

Image Source 

4. Increase usage

Another way to bolster market penetration is to try and increase product usage within your existing customer base. This might seem counterintuitive at first but it’s actually pretty effective. As existing users within the current market start to enjoy the benefits of your product in full they are more likely to act as advocates for your brand, helping you in turn to capture onboard new customers.

5. Adding new features

We already touched on the importance of differentiating your brand from the competition. Differentiation can be realized in many different ways from pricing to branding to epic customer service. One of the best ways to differentiate your product or service from those that already share your target market is to add new and innovative features that customers cannot find anywhere else. 

For example, if your competitors aren’t delivering 100% fulfillment on all of their orders then this is something you can work on to set yourself apart. At this point, you might choose to mobilize an amazon fulfillment center or follow the lead of Apple to improve your distribution channels and stand out from the crowd. 

By offering something that is otherwise unavailable you’ll be able to penetrate more of the market and capture consumers from your competitors. A great way to ensure that you’re consistently adding competitive features to your current product offerings is to engage in regular consumer panels, surveying, and communication. Ask your target market what they want and need (and what other brands out there are failing to provide) then give them exactly that.

6. Innovative marketing

As well as a more aggressive advertising campaign, you’ll want to incorporate as many innovative marketing practices and strategies as possible too. 

The key to reaching as many potential customers as possible is to employ an omnichannel digital marketing strategy across multiple platforms. This will solidify your brand’s standing in the market and generate more engagement with your products, services, and brand identity. 

Furthermore, consistent branding will keep your existing customers engaged and stop other brands from capturing customers from your market share.

Top marketing strategies include:

• Social media marketing 
• Search Engine Optimization (SEO) 
• Paid ads (such as on Google or Facebook) 
• Video marketing 
• Affiliate marketing 
• Influencer marketing 
• Email marketing campaigns 

7. Dealerships and partnerships

As we touched on just a moment ago, forging partnerships and dealerships with other businesses can be incredibly advantageous when it comes to achieving high levels of market penetration. This is particularly true when partnering with a company that already has a well-established market niche and a loyal base of customers who trust the brand. 

That niche could be anything from a particular service, or even expertise in a specific geographical area. Common examples of brand partnerships like this include deals made between electronic goods manufacturers and online retailers. Think about it. Most of us buy branded electronic goods from third-party retailers, not the manufacturing company themselves.

It’s never been easier for brands and agencies to partner up. Tools like Affise Reach are creating interconnected spaces where brands can connect and forge effective partnerships. Through these partnerships, businesses can then enlarge their target audiences and achieve sustainable long-term growth. 

8. Resellers

Resellers are businesses that buy products directly from a manufacturer at below market value, with the intention of re-selling said products for a profit. Reselling is an effective way to forge a place for yourself within an already competitive market. In order to compete with more established brands, resellers nurture customer relationships with optimized services and customer support that serves to capture more customers from the competition. 

9. Influencer marketing

Influencer marketing is a marketing methodology that involves companies partnering up with well-known public figures or influencers. By partnering with an influencer who shares your business’ target demographic, you’ll benefit from a ready-made funnel of incoming customers. 

Influencers recommend products and services, reinforcing the reputability of the brand they are endorsing. Influencer marketing allows businesses to tap into a ready-made community of potential onboards in exchange for a percentage of each sale made via their affiliate link. 

10. Integrated marketing

An integrated marketing approach is a super effective way to support market penetration. Integrated marketing is essentially any marketing campaign with a unified and consistent message that appears across all marketing channels. 

Consistency sells. Consistent messaging and imagery make a brand more recognizable, trustworthy, and memorable for prospects. So make sure you’re delivering a unified and consistent experience in all of your marketing campaigns that aligns with your brand values, aims, and aspirations.  

11. Field marketing

Field marketing is a particular type of market research that involves brands testing out their products and services directly with real-life consumers. Typically brands organize these field-research events on campuses, malls, and retail locations. 

The idea is to support product development by learning from customer feedback whilst building brand awareness and targeting specific locations to increase sales. During a field marketing campaign, brands might engage in activities such as:

• Offering customers product experiences
• Roadshows 
• Product samplings
• Sales promotions 
• Direct selling on location
• Guerilla marketing techniques

This comprehensive approach to marketing is a fast way to generate buzz around a product and ensure that customers are talking about your brand as it enters the market.  

12. Thwart the Competition

Finally, and most important of all, you’re going to want to quash the competition. That is, after all, what market penetration is all about. No playing nice here. Remember what we just said about differentiation? Well, that’s going to be your best friend. The best route to epic market penetration is offering features that your competitors simply cannot replicate themselves. 

Ready to start growing your business. Market penetration is one of the most important growth strategies out there when bringing new products to an existing market. By implementing these top 12 strategies you’ll be sure to stay abreast of the competition and capture more customers.

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How to create a market penetration strategy

Most companies strive for market penetration as soon as they enter a new market to launch a new product. The hope is to enter the market swiftly and capture a sizable market share. 

What is market penetration? In simple terms, it’s planning how to grow your business in an already thriving market where similar products exist. When you enter an already established market, you need to have strong implementation and execution strategies in order to get the upper hand against your competitors. This is where market penetration strategies come into play.

Market penetration strategies carry a low amount of risk and are ideal tactics for business growth, especially for startups that are low on cash or can’t invest in riskier growth strategies. Entering an established market is a safe bet as it already guarantees a need for products in your industry.

Before you can start considering which strategy to move forward with, it’s important to note that market penetration can be looked at as a metric or an activity.

Market penetration as a metric

Market penetration as a metric assesses how much of a product is being sold in relation to the total estimated market for that product. This metric is expressed as a percentage. When market penetration is viewed as a metric, it can also be called the market penetration rate.

See the simple calculation below that you can follow to get the market penetration rate:

     Market penetration rate = (number of customers ÷ target market size) x 100

This can be calculated if you know your total addressable market (TAM), which is the total amount of money you can make selling your product or service. Sometimes calculating your market size can be tricky, especially depending on the nature of your product. Plus, your potential customer base could be global and your target audience may be “everyone.” The more particular you can be with your ideal audience demographics, the easier it will be for you to calculate.

To know whether or not your product or business is doing well once you’ve calculated your market penetration rate, consider this — the  average rate for market penetration  for a consumer product should be around 2% to 6%, whereas a business product can range anywhere from 10% to 40%. If you’re able to hone your product to where you can capture around 10% of the TAM in your industry, you’ll be doing quite well.

Apple offers a good example of successful market penetration. Within the smartphone industry, the  iPhone has a market penetration rate of 19.2% , whereas smaller brands like Huawei have 10.2%. 

Market penetration as an activity

As an activity, market penetration is the process of going to market with a product (in an existing market where current or similar products already exist) and taking market share from competing companies. This can also be known as market penetration strategy.

Market penetration as an activity first stemmed from the  Ansoff Matrix . The Ansoff Matrix was developed in 1957 by Igor Ansoff and is used to help companies plan their strategies for future growth. It’s a 2×2 matrix that represents four different business growth strategies including market penetration, product development strategy, market development strategy and diversification strategy. 

Market Penetration Strategies

There are several different ways you can approach market penetration and different strategies to apply in order to achieve success. We’ll highlight five strategies below.

1. Improving marketing effectiveness

This may feel like a “no duh” approach, but updating your content and analyzing its effectiveness can go a long way in market penetration. Consider these three ways to improve your marketing effectiveness: content adoption, content effectiveness or content customization.

Content adoption rate

How much of your content is actually being used? If your marketing team is churning out content that is rarely used by the rest of your business, it could be because that content is ineffective (see below for more about that) or because the content is too difficult to find or use. By adopting brand templating, your marketing team can organize templated content in one location that stakeholders can quickly find and customize to their needs.

Content effectiveness

If you’re looking to improve your marketing effectiveness, you need to ensure that your content is on brand and on message so you don’t lose customers to irrelevant or low quality content. Brand education, brand consistency controls and regular feedback from customers and stakeholders on which content is most effective is critical to stand out in a saturated market.

Content customization

Empowering everyone in your organization to customize content is a powerful way to improve content effectiveness. Provide your staff with tools like templates that they can adapt and personalize based on customer and industry insights.

2. Increasing brand awareness

Similar to improving marketing effectiveness, another good market penetration strategy is to increase brand awareness. You can do so through several different ways including branded packaging, upping your presence on social media, working with influencers or leaning into your brand story and personality.

No matter which approach you take with increasing your brand awareness, you have to be consistent with your brand across all platforms and channels. With a consistent brand voice and aesthetic, potential customers can get to know your brand and recognize it easily.

3. Enabling multiple distribution channels

In today’s digital world, it’s no longer enough to simply sell through your personal website or in a brick and mortar shop. You need to post your content on multiple channels, as well as sell your product or service through different distribution channels as part of your market penetration strategy. That can include internal sales,  channel sales partners , digital channels,  franchises  or strategic alliances.

If you’re looking at acquisition, know that by buying a company within your industry, you can practically buy the customer base and the market share along with it. Or, you can buy the competition and shut them down. This business plan may not be accessible for small startups, but may be feasible for more established companies.

If you can’t buy out your competitors, then making a strategic alliance as channel partners with similar companies will help you to capture their audience while also widening your market. Remember to put brand guidelines in place to keep your messaging consistent — it will ultimately make your channel partners’ lives easier too.

Creating a business franchise can also be a well-planned market strategy helping you to stand out among competitors. Franchising can be a cost-effective way to quickly get you into a market, because you won’t be footing the cost for every location. In franchising, franchisees use the brand and open their own location, while the franchisor gets royalties from the profits.

To help with  brand consistency  across franchises, create a brand manual that will detail things like your brand’s voice and tone, outline a general code of conduct, and include best practices templates. These templates will ensure that franchisees won’t stray from correct branding. Using templates like those provided by Lucidpress will help you create and customize templates so your franchises won’t have to create content from scratch. You can also use a  content marketing platform  to create, manage, distribute and organize all of your content in one place.

4. Changing pricing

Another effective market penetration strategy is through lowering or raising your prices. In fact, it’s one of the most widely used tactics. Lowering the price of a product with the intent of increasing sales is considered a price adjustment tactic. After analyzing your competitors’ prices, offering lower prices or an openly discounted price (that will be raised later on) can help swing business your way. If you do take this approach, be careful, as overdoing it can lead to the opposite effect that you’re hoping for.

5. Updating or launching products

Small adjustments to your product or service can make a big difference in your market penetration strategy. Reaching out to customers or clients through surveys or researching competitors can help you understand what your audience is looking for along with what they’re saying about your current products. By listening to your customers you can pinpoint essential functions or features that they want. If done correctly, you could end up giving your market something they need but can’t find with any other company.

Whether you choose any one of these tactics to help your business grow, it’s important to note that market penetration won’t affect your overall marketing strategy for your business. Rather, it will bring solid growth potential and increase revenue. However, each of these strategies will require strong implementation and execution in order to compete and grow alongside your competitors. So be ready to stick to your guns and don’t give up too soon.

Want to create a more memorable, consistent brand? Check out our free ebook — The extra 1%: Delivering a memorable content experience.

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Market Penetration Strategy and How to Create a Successful One

Have you ever watched a startup with early success begin to flounder and lose momentum? Losing market share to competitors often isn’t about what you’re doing wrong – it’s about what you’re not doing at all.

Highly successful brands turned household names like Amazon and Apple use various strategies to position themselves for consistent growth, but market penetration is a valuable one that can help elevate an existing product in an existing market. If a company, whether an established business or an early startup, is lacking a strong market penetration strategy, this deficiency can greatly impede its opportunity for growth. 

The right market penetration strategy slightly varies for every company. Understanding the goal of this growth strategy, various ways to further penetrate the market, and the benefits gained when you develop your market penetration strategy will help you hand-pick the tactics that will have the most return for your startup.

Market Penetration Strategy Defined

Market penetration strategy comes from the Ansoff Matrix , also known as the Product/Market Expansion Grid, created by H. Igor Ansoff. The grid contains four strategies: market penetration, product development, market development, and diversification. Of these four strategies, market penetration carries the lowest risk, making it a safer option for startups when they want to grow their market share. Diversification holds the highest risk.

Market penetration strategy concerns existing products within an existing market and aims to capture a larger portion of the market’s customers to drive sales and increase overall brand awareness.

Different Types of Market Penetration Strategies

Successful businesses rely on several market penetration strategies to corner the market, but not every business needs to use every strategy. Different strategies take different approaches, and some lend themselves better to certain products, markets, or businesses than others. 

Explore the different types of market penetration strategies to discover which options may work best for your startup.

• Penetration Pricing – To increase market share, you may want to lower your product price so it’s closer in value to your competitors. To illustrate, if there are tons of similar lemon-lime sodas in the market, offering the same product at a lower price could help make your soda more attractive and increase the likelihood someone would choose it over the more expensive options.
• Multi-Channel Marketing – Where and how are you marketing your product? Expanding your promotion across multiple channels can ramp up brand awareness . For example, if an online clothing brand was only creating digital ads on websites, then expanded to include advertisements on Instagram and TikTok, it would boost awareness, particularly among millennials and Gen Z. This would likely increase sales of their product and help claim a greater share of the ecommerce market.
• Distribution Expansion – Reconsidering your distribution channels can increase the opportunities a consumer has to see, engage with, and potentially buy from your brand. If you’ve been limited to online sales, and then work out an agreement with a retail chain to carry your product, it’s a perfect example of expanding your distribution. 

Using resellers can be a fast and inexpensive way to expand distribution and get your product to market by capitalizing on a more established company’s sales and marketing team that is selling to the same customer. You can simply pay these resellers a commission, then use the money generated to create your own sales team for more direct sales.

• Product Improvement – Product improvement starts with understanding your target audience: what they prefer, what their pain points are, how the product could eliminate those pain points if modified. Once you pinpoint ways to modify the product to satisfy their expectations, you can get ahead in the market. Think about how vastly different phones are today than they were years ago; that’s product improvement in action.
• Rewards Program – A rewards program works by incentivizing current customers to stay loyal. When there’s so much similarity between products, a loyalty program like this can be the deciding factor between purchasing from you or your competitor. 
• Partnership – In a deeply competitive market where startups may struggle to make any noticeable traction, sometimes partnering with other businesses is the key to getting ahead. In certain situations, joining a larger, more established company in a partnership can provide some additional resources and access to a much greater customer base.
• Optimizing Marketing Campaigns – Many of the above strategies involve pretty drastic changes, but sometimes smaller adjustments can have the biggest impact. Slight changes, like optimizing your messaging in advertisements, offering new incentives, or relaunching campaigns with slight changes based on market research can help you more effectively reach consumers.

Why is a Market Penetration Strategy Important?

Having a market penetration strategy in place for your business is essential to find traction in an existing market when you’re selling an existing product. Without it, you’ll fail to differentiate your offering or will burn through your budget trying.

While market penetration strategies are the least risky growth strategies, they don’t come without challenges. Some may even argue that the challenges are much steeper, having to find a way to stand out in a mostly homogenous environment and earn loyalty among many consumers who have already placed their loyalty elsewhere.

Without creating a clear market penetration strategy and using it as a roadmap to break through these barriers, startups will struggle to stay ahead of the pre-established competition.

Creating and Implementing a Market Penetration Strategy That Works For Your Business

Market penetration strategies cover a broad range of tactics, from making physical product changes to expanding distribution channels and slight tweaks in marketing campaigns. They won’t all work every time; you have to find the ones that work for you.

To create and implement a market penetration strategy that best supports your business growth, you need to first understand your market, your business stage, the product you’re selling, what your competition is offering, what your current market penetration is, and what your market penetration goal will be.

Take Amazon as an example of a company that has found market penetration strategies that work for them. With Amazon Prime, Amazon has created a “club” of sorts with members that have access to free and fast shipping and special deals, like on Prime Day. Over 100 million American shoppers currently hold Amazon Prime memberships, making up 62% of its customer base in the US, so this attractive “membership” has clearly been successful in recruiting loyal customers.

Components of a Successful Market Penetration Strategy

A strong market penetration strategy consists of three main components. While each component will play out differently from company to company, including the following ensures you’re starting on the right foot.

• Research. Research the existing market and competitors, understand how long they’ve been in the industry and what kind of sales they are experiencing for similar products, how they price their products, what their common problems are, and how your product may be able to add more value.
• Differentiation. Differentiation is the key to capturing more of an existing market. You have to be both different and better than the competition. This may come through pricing, incentives, partnerships, rewards programs, or product improvement.
• Marketing. Your marketing is what will allow you to share your differentiation, build brand awareness and drive brand loyalty. This could include expanding the marketing channels or an optimized marketing campaign.

Market Penetration Strategy Outline: How to Develop a Market Penetration Strategy

If you’re ready to get started on your market penetration strategy today, use this outline as a guide.

Step 1 – Perform a Market Analysis

Before you can strategize how to penetrate a market, you need to understand the market itself. Find out who the major players are in the industry, and learn everything you can about them. What works for them, what hasn’t worked for them, and, if possible, their market penetration percentage.

This can be a lengthy process, so the sooner you start, the sooner you can make power moves within your market.

Step 2 – Find a Way to Differentiate

Next, find something that you can offer, a value or benefit you can provide, that the competition can’t. This might look like a cheaper product, an improved product, or expanded distribution channels. To find the right way to differentiate, consider your buyers. What do they need, want, and what’s lacking? Are there any gaps your product could fill? 

Step 3 – Make a Marketing Plan

Next, begin developing a marketing plan that will best reach your target audience. Explore your buyer personas and learn where they spend time digitally, what methods of advertising they’re most receptive to, and what price level is reasonable to them. The goal is to find ways to get their attention through marketing within an already noisy market and offer a tempting alternative, which can be a challenge.

Step 4 – Execute and Analyze

Once you begin executing your market penetration strategy, keep a close eye on the results to learn what is and isn’t working. You will need to make adjustments as you get more data to support the right tactics. 

What are the Benefits of Market Penetration?

Despite the challenges, when you commit to a market penetration strategy, you’ll see benefits within your startup. Advantages of an effective market penetration strategy include:

• Accelerated Growth – Market penetration strategies may help customers quickly adopt your products over the competition because of its differentiation.
• Brand Loyalty – When customers see that you provide a similar product at a better price or slightly improved in some way, they will grow in their loyalty to you and may refer others to your company.
• Cost-Effective Operations – By selling a product at a lower price, startups can keep their sales volume high, which allows them to continue ordering more materials from vendors to keep up with the growing demand. By purchasing bulk orders, you can lower production costs and increase profits.
• Discouraging Competition – With a stronghold on the market, you may discourage other competitors from entering in the first place, allowing you to maintain your position.

Standing Out In Noisy Markets With Market Penetration Strategies

Both established businesses and early-stage startups need to find strategies that help them compete in today’s market. For startups selling products that already exist, the barrier of entry can feel especially high. With a well-developed market penetration strategy based on research and a thorough understanding of the market, even early-stage startups can stand out in a noisy market and earn the business and loyalty of their target audience.

Sometimes the best recommendations for a marketing penetration strategy come from experienced entrepreneurs who have spent time within the existing market you’re entering. Angel investors often bring this kind of experience to their investments, and their startups reap the benefits of their learned lessons. 

If you’re preparing to launch a tech product and could benefit from the insight of a seasoned entrepreneur and angel investor to develop an effective market penetration strategy, reach out to MacDonald Ventures .

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Market Penetration Examples: Strategies to Scale Your Business

12 min. read

Increasing market penetration is the easiest way to grow your business. That's because it doesn't require developing new products or expanding into different markets. All you need to do is increase the sales volume of your existing product or service in the existing markets.

How can you achieve that?

That's exactly what we explore in the article! We start by looking at some successful market penetration examples. Next, we discuss various levers that you can pull to drive market penetration and dissect a few concepts that you may need.

Market penetration examples

What companies are known for an outstanding market penetration strategy? Let's have a look at a few examples.

As an online retail business, Amazon has completely dominated the American market.

How does Amazon achieve such dominance?

For starters, it uses a range of marketing techniques , like multi-media advertising, to promote its goods. To improve the accuracy of the marketing efforts, the company uses A I and machine learning to personalize the offer for their customers.

To drive repeated custom and customer loyalty, Amazon offers bulk discounts, subscriptions, and Amazon Prime.

The latter gives the company an enormous advantage as no other retailers have the infrastructure and can afford to match their delivery times (not to mention the added benefits of services like Prime Video and Music , which are even more difficult to compete against).

Finally, the company invests in technology that allows customers to purchase and consume their products more easily like the Kindle e-readers.

Apple iPhone

Apple is another company that has nailed its market penetration with iPhone. In the US, over 50% of smartphone users have iPhones.

Apple relies on a number of methods to drive its iPhone sales. Two of them stand out in particular: product innovation and strong community.

When the first iPhone launched in 2007, it revolutionized the mobile phone market. Since then, the company has innovated its flagship product by making it more functional and making its users' lives easier.

Thanks to innovation and skillful marketing, the company has developed a community of devoted fans who drive the sales of the new models.

It's very unlikely that the fanboys and fangirls out there would want to switch to competing products.

Adobe is a major force in the graphic design software market. The company claims that over 90% of the world's creative professionals from different sectors use its best-known product, Photoshop.

How does the company manage to achieve such deep market penetration?

First, Photoshop is the gold standard when it comes to quality . It's by far the most advanced and sophisticated graphic design product out there, and Adobe is constantly developing it to satisfy its customer needs better.

Photoshop comes as a part of the whole ecosystem of graphic design products which massively expands its functionality but also makes it difficult to compete against. Competitors may be able to beat one of the products but not all of them.

Coca-Cola is an undisputed leader in the soft-drink market and one of the most recognizable brands in the world.

How does the company do it?

For starters, the company leverages its strong brand and uses aggressive advertising to drive sales. This includes prime-time TV adverts and sports event sponsorship.

The company has also increased its market penetration through acquisitions of rivals. These included Smartwater and Vitaminwater, Fuze Beverage, and Honest Tea.

With almost 36,000 shops in 83 countries , Starbucks is the world’s largest coffee shop chain.

Its penetration strategy relies on increasing the number of shops and speeding up the ordering process. So apart from adding new shops to its chain, the company has transformed many of them into express and pick-up stores where you can order in advance using your mobile.

McDonald’s is the world’s largest fast-food restaurant chain. Even if you are not a fan of their food, you can't deny that the company does a brilliant job of driving its market penetration.

Like most companies, McDonald's uses a range of strategies to achieve this.

While their menu is built around a number of staples like BicMac and milkshakes, the company constantly experiments with new offerings . These include healthy options like salads and seasonal offerings like Katsu Chicken Nuggets.

McDonald's manages to drive sales also thanks to its clever pricing strategy. This includes bundling up dishes into meals.

12 Tried and tested market penetration strategies

Now that we've seen some excellent examples of market penetration, let's have a look at a few common market penetration strategies that can help you increase the market penetration of your business.

#1 Adapt your pricing strategy

Adjusting your pricing is one of the first things you should consider when trying to increase the market penetration of your product.

Lowering the prices could make it more affordable for your customers, so could potentially increase your market penetration.

However, it may have a negative impact on the perception of your brand. Being perceived as 'cheap' may make your product less desirable.

Changing your pricing from annual to monthly can have a similar effect. It will conversion rates but may result in lower customer lifetime value.

#2 Invest in marketing and promotion

If you're a new business, investing in a large-scale marketing campaign will help you grow your brand awareness in the existing market. It will help you reach more users and persuade them to switch.

The choice of channels and marketing assets will depend on your sector. Some popular options for digital products include:

• SEO and content marketing
• social media
• email marketing
• event marketing
• viral marketing
• video marketing
• word-of-mouth (WOM) marketing
• affiliate marketing
• influencer endorsements

#3 Improve your product

Improving your product to increase market penetration is a no-brainer.

Copying what works for your competitors could be a start, especially if your offer is lacking. However, ultimately your goal should be to build a product that satisfies customer needs better than everybody else.

Instead, listen to your customers to identify the problems and needs that your product or your competitors don't address and work on solutions. Validate them before implementing them to ensure that this is really what your users need and are happy to pay for.

#4 Change the product design

Modifying your product and or how it's delivered can increase its appeal massively and attract different user groups.

For example, smaller and lighter laptops may be a more attractive offer among weight-conscious users who have to drag them around on their commutes or business trips.

Similarly, packaging could make a massive difference. A 2-liter bottle is not very practical to carry around. Why not sell it in smaller bottles or cans then?

#5 Diversify distribution channels

Instead of relying on just one channel to sell your product, use a few to target different customers with different needs. Make sure to exploit the strengths of each of them.

#6 Target different sectors

Targeting a different sector within the same market is another way to boost your market penetration.

#7 Expand into different geographical locations

This one is a bit controversial. Whether entering a new geographical location is still market penetration or already falls under market development depends on the product.

For example, for SaaS companies, the distinction seems a bit artificial because there are no real borders on the Internet. However, if you're dependent on physical distribution channels, it does matter.

#8 Localize your product

If you decide to pursue geographical expansion, especially into different countries, make sure to localize your product.

It's a complex process but localization management tools like Centus will save you a lot of effort.

#9 Develop your sales team

Boosting your sales team activity is another way to grow your market penetration.

This may mean expanding the team but also increasing the intensity with which they engage prospective customers.

#10 Remove friction from the purchase process

When it comes to acquiring new customers, you want to make the purchase as easy as possible.

To achieve this, remove all unnecessary steps from the process and make it intuitive.

#11 Acquire your competitors

That's kind of easy. Instead of trying to woo customers away from your competitors, why not take over the competitor and together with their customer base ?

Of course, this is easier said than done but acquisitions (or mergers) are something worth considering if you're an established business.

#12 Build a moat

Increasing your market penetration isn't only about acquiring new customers but also retaining existing ones . Building a moat around your product will protect it from competitors trying to steal your customers and make it difficult for your customers to leave.

How can you do that?

First, make your product or business model difficult to replicate . For example, if your SaaS product depends on the content created by the users, like videos for YouTube, then copying your product features won't be of any use to your competitors.

And the more content users create, the more reluctant they'll be to switch if they can't reuse it on different platforms.

How to calculate market penetration rate

To calculate the market penetration rate, you need to divide the number of your customers by the number of all prospective users in the current market and multiply it by 100.

Market Penetration Rate = (Number of customers/Target Customers) x 100

Let's imagine you build antivirus software. Currently, you have 0.7 million users in the country. If there are 12 million PC users in the country, your market penetration is around 5.8%

(0.7/12) x 100 = 5.8%

Is this a good number? In B2C, the good range is between 4 and 6% , so you're smashing it. For B2B products , however, a good rate falls somewhere between 10% and 40%.

Market penetration vs market share

Market penetration is often confused with market share, and the two terms are often used interchangeably. However, they refer to two different concepts.

As mentioned, market penetration is the percentage of your total estimated market size that you sell to during a period of time. So if your company has a target market of 10000 customers and you sell to 2000 of them, your market penetration is 20%.

Market share, on the other hand, is the percentage of the total market value that your company claims. So the revenue from your 2000 customers may give you 1% of the total market value.

For most businesses, it's the revenue that matters most, and increasing market penetration is one of the vehicles to achieve that.

Market penetration vs. market development

Another term that is often confused with market penetration is market development.

Both market penetration and market development are business growth strategies. They both leverage your existing products to develop your business.

The easiest way to distinguish the two is by asking whether you're expanding in a new or existing market.

If you're entering a new market, we talk about market development. If you're growing your business in existing markets, it's market penetration.

High market penetration benefits

As a growth strategy, market penetration has a number of clear benefits:

• increased sales and financial success
• greater brand awareness and equity
• increased product visibility in the market
• lower costs thanks to economies of scale

Risks of increasing market penetration

To realize the benefits, however, your expansion needs to be well-planned and supported with adequate resources. Some common risks involved in market penetration include:

• incoherent product and brand identity
• damage to company image as a result of attracting the wrong customer groups (think Burberry and the 'chav' culture)
• inconsistent marketing strategy
• the strain on company resources and infrastructure, and the lack of alignment between different departments.

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Market Penetration Strategy: A Guide to Dominating the Market

• January 13, 2024

Your business has a solid product or service, but sales growth has stalled in a competitive market.

Despite your efforts, increasing market share and differentiating your brand in an already thriving market remains challenging.

In a market crowded with competitors, making a significant impact and capturing a larger target market size can be daunting. Your existing product may be good, but it’s not enough to just maintain your current customer base – you need to expand it.

This is where a well-crafted market penetration strategy comes in.

This approach isn’t just a buzzword; it’s a comprehensive plan to increase sales and grow your business in new or existing markets. With the right tactics, you can enhance your average market penetration rate, expand your customer base, and outpace competitors.

This article will delve into the essence of a successful market penetration strategy, from understanding the term market penetration to implementing business growth strategies that work.

Whether you’re looking to refine an existing product, tap into a potential market, or explore diversification strategies, you’ll find actionable insights here.

What is a Market Penetration Strategy?

A market penetration strategy is a dynamic marketing strategy approach aimed at increasing sales and the market penetration rate of existing products or services in an existing market. This penetration strategy revolves around deepening a brand’s influence and increasing its market share in the established market.

By focusing on existing and potential customers, it aims to maximize the potential of the company’s current product or service offerings.

This approach often involves enhancing the overall marketing strategy to reach the target market better and expand the customer base. An effective market penetration strategy leverages distribution channels, market development techniques, and marketing campaigns to increase brand awareness and lure customers away from competing companies.

It may also include tactics like lowering prices or improving existing products to make them more appealing than competitors’ products.

Ultimately, the goal of a market penetration strategy is to grow the existing customer base, increase market penetration in the target audience , and establish a strong position in the chosen market. When executed well, it contributes significantly to a business’s solid growth potential, making it an integral part of any comprehensive growth strategy.

What is Market Penetration Rate?

The market penetration rate is a measure that shows the extent to which a product or service is used in a specific market compared to the total estimated market size. It’s calculated as the percentage of the total estimated market that a company’s product or service has captured.

This rate is essential for businesses to assess their market position, understand the effectiveness of their market penetration strategy, and identify opportunities for growth in their target market.

For consumer products, achieving a market penetration rate between 2% and 6% is generally considered successful. In contrast, business products aim for a higher range, typically between 10% and 40%. These benchmarks offer a useful point of reference for businesses to gauge their performance against industry standards.

Market Penetration vs Market Share: Clarifying the Concepts

Market penetration.

Market penetration measures how much the target market uses a company’s product or service. It’s about reaching new and existing customers in an existing market to expand the customer base.

A market penetration strategy aims to increase the market penetration rate through targeted marketing campaigns, distribution enhancements, and pricing strategies, thereby boosting brand awareness and customer numbers.

Market Share

Market share indicates a company’s sales as a proportion of total sales in the market. It reflects a company’s competitive position, with a higher market share signifying market leadership.

Companies increase market share by capturing more of the total market, often through product improvements, competitive pricing, and strategic marketing, outperforming competitors in the process.

Relationship Between Market Penetration and Market Share

Market penetration and market share are interrelated in a company’s overall marketing strategy. Increasing market penetration can lead to higher market share as more of the target market becomes customers.

Similarly, a substantial market share can support further market penetration efforts, as an established market presence attracts additional customers.

Benefits of Using a Market Penetration Strategy

A market penetration strategy offers several key benefits, making it an appealing option for businesses seeking growth. It is a budget-friendly approach that capitalizes on existing products and resources to expand the customer base in the current market.

This strategy helps increase the market penetration rate, focusing on existing and potential customers within the target market.

By intensifying efforts in existing markets, a business can solidify its market presence and become more resistant to competitive pressures. This increased market penetration makes it challenging for competitors to capture market share.

Consistent interaction with the customer base through targeted marketing campaigns and strategic distribution channel decisions can enhance brand loyalty and recognition.

An effective market penetration strategy also significantly influences an overall marketing strategy. It contributes to business growth by maximizing the potential of established market positions.

By appealing to the ideal audience demographics and offering products or services that resonate with the target audience, a company can see a rise in sales and an improvement in its position as a market leader or one of the market leaders.

Additionally, this approach can lead to new opportunities for market development. As the company increases its foothold in existing markets, it may uncover insights that pave the way for entering new markets or introducing new product lines . Ultimately, a good market penetration strategy increases sales and market share, sets the stage for sustainable future growth, and solidifies the company’s long-term market position.

Types of Market Penetration Strategies

• Price Adjustment Tactics

One effective approach in a market penetration strategy is adjusting prices. Lowering prices can be a powerful tool to lure customers from competitors, especially in a saturated market.

This price adjustment tactic not only increases sales but also helps in gaining a larger market share. It’s particularly useful when targeting price-sensitive segments of the target market.

In 2023, the e-commerce penetration rates vary across product categories. Media, especially video games, lead with an impressive 78.2% penetration rate . Other categories follow, with office equipment and supplies at 54.3%, electronics at 53.6%, and sporting goods at 43.7%. Understanding these varying penetration rates can inform strategic price adjustments in different e-commerce categories.

• Enhancing Marketing Efforts

Boosting marketing efforts is key to an effective market penetration strategy. Marketing campaigns aimed at increasing brand awareness can draw in potential customers and strengthen the company’s position in the existing market.

By targeting the ideal audience demographics with tailored messages, companies can expand their customer base and increase their market penetration rate.

For instance, by 2023, nearly half (48%) of the U.S. market share for beauty and personal care products is expected to be online. Additionally, a significant portion of the pet care sector’s growth, 90%, is driven by online sales . These statistics illustrate the power of online marketing strategies in expanding market reach and capturing a significant share of consumer spending in specific sectors.

• Improving Distribution Channels

Another vital component of market penetration strategies is enhancing distribution channels. Making products more accessible to the target audience in the chosen market can significantly increase market penetration.

This involves physical distribution and online sales channels, ensuring that the product or service is available where the target customers are most likely to shop.

• Product Refinement

Refining existing products to better meet customer needs is a cornerstone of a good market penetration strategy. Companies can attract existing and potential new customers by improving product quality or adding new features.

This approach helps not only increase market penetration but also establish the company as a market leader in its given market.

Overall Impact

Incorporating these strategies into an overall marketing strategy can lead to successful market penetration. Whether it’s through lowering prices, enhancing marketing efforts, improving distribution channels, or refining products, each tactic plays a crucial role in increasing market penetration.

When executed well, these strategies contribute to business growth, solidify market presence, and set the stage for future growth and expansion into new markets.

How to Create a Market Penetration Strategy

Understanding the target market and competitors.

Begin by thoroughly analyzing the target market and competitors. This involves assessing market size, customer demographics, and the current market penetration of competing companies. Understanding the target audience and the existing market landscape is essential for tailoring a market penetration strategy that effectively increases market penetration.

Setting Specific Objectives

Next, set clear and measurable objectives for the market penetration strategy. This might include goals like achieving a market penetration rate or increasing sales in established markets. Defining these objectives provides a clear direction and helps measure the strategy’s success.

Engaging the Marketing Team

Involving the marketing team is crucial in aligning the market penetration strategy with the overall marketing strategy. The team should focus on designing marketing campaigns and distribution strategies that resonate with the target market, aiming to increase brand awareness and attract potential customers.

Monitoring Market Trends and Customer Feedback

Continuously monitor market trends and gather customer feedback. This information is vital in adapting and refining the market penetration strategy over time. Staying attuned to changes in customer preferences and market dynamics ensures that the strategy remains relevant and effective.

Leveraging Distribution Channels

Consider optimizing distribution channels to improve accessibility to the product or service. This could involve expanding online sales channels or forming strategic alliances to penetrate markets more effectively. Efficient distribution plays a key role in increasing the market penetration rate.

Product or Service Refinement

Regularly assess and refine the offered product or service to better meet the needs of the existing customer base and potential customers. This could involve making improvements based on customer feedback or introducing new features to lure customers from competitors.

Real-Life Example: Starbucks’ Market Penetration Success

Starbucks provides an excellent example of successful market penetration. Initially a single coffee shop, Starbucks embarked on a rapid expansion strategy, opening numerous outlets both domestically and internationally.

They focused on increasing their presence in existing markets, making Starbucks coffee easily accessible to a broad customer base. By offering a consistent, high-quality product and a unique customer experience, they were able to attract a loyal customer following. This approach helped Starbucks increase sales and establish a dominant presence in the coffee market.

As of 2023, Starbucks operates over 32,000 stores in 80 different countries, making it the largest coffee chain in the world​​. In the fourth quarter of fiscal 2023 , the North America segment of Starbucks reported a 12% increase in net revenues to $6.9 billion, primarily driven by an 8% increase in comparable store sales​​. Globally, Starbucks has shown remarkable growth, with China emerging as the second-largest market. Starbucks plans to nearly double the number of locations in China, aiming for close to 9,000 stores by 2026​​.

Starbucks’ expansion and adaptation strategies demonstrate a successful approach to market penetration, balancing growth with meeting evolving customer needs. Their success story serves as a model for businesses aiming to increase their market presence and customer base.

Mastering a market penetration strategy is essential for businesses looking to break through sales plateaus and gain a competitive edge in today’s markets. From understanding the intricacies of market penetration and market share to implementing tailored strategies that resonate with your target audience, this article has provided actionable insights for business growth.

Whether through price adjustments, enhanced marketing efforts, improved distribution, or product refinement, these strategies are key to expanding your customer base and solidifying your market position.

Remember, market penetration is not just about immediate gains; it sets the stage for sustainable growth and long-term success. Embrace these strategies, adapt to market trends, and watch your business thrive in the competitive landscape.

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Best Examples of a Market Penetration Strategy

Do you want to build an effective market penetration strategy, but you’re unsure where to begin? Understanding how market penetration works can be tricky, but there are easy strategies you can use to help boost your company’s growth. 

For example, using website builders such as Boxmode is an excellent way to improve your online presence and penetrate various markets. Before starting to create a market entry strategy, there are certain aspects you must learn. 

What follows is what market penetration is and how it differs from market development. Additionally, we’ll give you tips on choosing your market penetration strategy and strong examples that may inspire you.   

What Is Market Penetration? 

Some business owners may get confused by the term “market penetration” because it has two meanings. It can be defined either as an activity or a measurement. Take a look at both definitions below: 

• Market Penetration Measurement: This market penetration definition refers to how much product is being sold relative to the total target market for that specific product. It’s typically expressed as a percentage and is also known as a market penetration rate. 
• Market Penetration Activity : As an activity, market penetration means entering the market with a product where similar products are for sale. 

These are market penetration strategies. 

A market penetration strategy appeared in 1957, with roots in the Ansoff Matrix . The Ansoff Matrix has four business growth strategies: 

• Market development strategy 
• Market penetration strategy 
• Diversification strategy 
• Product development strategy 

Companies use a market penetration strategy releasing improved versions of existing products in existing markets. The advantage of this strategy is that it has low risk, and it’s the ideal strategy for startup businesses using Software as a Service (SaaS) . 

You can plan how to grow your business in an already thriving market. Besides, placing your products in an existing market is a safe strategy because you know there is already a demand for them.

However, you must check your competitors to make sure you stand out from the crowd. Therefore, your prices must be reasonable and affordable, and your services must be better than those of your business rivals.

The Difference Between Market Penetration and Market Development

It may seem that development and market penetration are the same strategies, but there are many differences between the two. Market development strategy is applied to attract new customers, while market penetration strategy helps enter an existing market. Read on to learn the advantages and disadvantages of market penetration versus market development.

Market Development Advantages and Disadvantages

If you successfully implement your market development strategy, you will attract new customers, increase company growth, and boost revenue.

Market Development Benefits

The market development strategy benefits your business in various ways:

• Increases customer base: A market development strategy attracts people from a different geographic region to the company’s product and turns them into consumers.
• Puts you at the top of the industry: Careful implementation of this strategy can put you in a dominant position. You can achieve this by selling the product to a broad audience.
• Helps the company grow: As you reach out to more people, your customer base grows, and your company evolves.
• Increases the profit: This strategy helps increase the company’s income. As you attract more clients, you sell and earn more.

Market Development Risks

Market development also carries certain risks and drawbacks.

• Increased risk: The major drawback of a market development strategy is that it requires investments for expanding your business. You will have to allocate funds for marketing to build your brand in new territories. If the plan doesn’t work, you’ll wind up wasting money and resources you could have used for other essential activities. 
• Fierce competition: To launch a new product/service, you need a lot of courage and knowledge of effective strategy implementation. If you’re launching a product in the existing market, remember the demand for it may already be met. And in this case, you will have to offer a much better product/service to beat the competitors. 
• Management under pressure: Entering a new market can be a headache for management. To successfully implement a market development strategy, businesses need to grow, hire more specialists, and improve production to serve new and existing customers better. This requires enormous management resources.

Market Penetration Advantages and Disadvantages

The market penetration strategy provides multiple advantages and drawbacks.

Market Penetration Pros:

• Accelerated growth: If your business and marketing goal is to expand your customer base, market penetration is the best tool to reach that goal.
• Lower risk: A market penetration strategy is less risky compared to the market development strategy. The latter requires more marketing efforts to penetrate deeply into an existing market. 
• Better market share: The goal of the market penetration strategy is to increase market share by lowering prices or offering customers something that your competitors are not delivering, such as promotions or coupons.
• Cost-efficiency: When you offer products/services at lower prices than your competitors do, it will attract more leads and feed the top of your sales funnel . Next, you will have to increase productivity to satisfy the growing demand. To make the production cost-effective, you can increase the revenue.

Market Penetration Cons:

As good as marketing penetration strategy is, it also has some limitations.

• Overcrowded markets: With time, the market you’re aiming at can become oversaturated, meaning that consumers may already be satisfied with what your competitors have to offer.
• Huge production costs: If production costs are high, trying to set the lowest prices can lower profits. This is especially acute for small companies whose competitors are large enterprises with a production volume sufficient to reduce production costs.
• Industry prices decrease: A market penetration strategy can drive prices down across the industry. A company that pioneered a market penetration strategy must lower prices further to stay ahead of the competition. Soon, all competitors may be selling products at meager prices with little or no profit.

How to Choose Your Market Penetration Strategy

There are sub-strategies within a market entry strategy you can use. But how do you choose the best one for your business growth? This next section will provide the market penetration strategies you can choose based on the market you enter. 

Market Penetration Pricing 

When you expand into a new market, the best way to boost sales is by setting competitive prices on your products or services. If you can, find out what your competitors are charging the target audience and make sure your prices are lower than theirs. 

The pricing strategy works well in areas where customers are price sensitive. This way, you can sell large volumes of products and generate high margins. Once you establish customer loyalty, you have the choice of reverting to regular pricing. 

Before you adjust your prices, research your market’s average income in your area. If your customers are paid high salaries, the product may be considered less valuable if the price is too low. You want to adjust your pricing so that the lower cost is seen as a bargain.   

New Product Launch 

Another market entry strategy that always works is introducing a new product into the market that you believe your customers will want or need. Find out what your target market wants by sending them surveys or questionnaires to identify what products they require. 

Furthermore, pay attention to your customers’ spending habits and keep an eye on which products they spend the most on. If the new product you are introducing meets your customers’ requirements, your launch will be more successful.

Find New Target Segments 

Saturating a specific demographic with a product can slow down your company’s growth. But did you know you can discover new audiences among a large number of people? Find new niches to advertise your products and grow your customer base. 

Another way to open up new target segments is to profile your target market. One of your products may become popular within a specific demographic that you didn’t know. Use profiling data to stay on top of trends and know where your products will be in demand. 

Revamp Your Marketing 

Are your marketing strategies preventing you from penetrating deeper into the market? You may need to revamp your marketing efforts. To enter the market, you may need to leverage ad trends and target a specific location.

Advertise your unique selling point to attract more customers. Or offer promotional products and discount codes to your price-conscious customers. You can advertise through email marketing, social media, or building websites with platforms like Boxmode to build brand awareness.

Expand to More Territories

One of the most common and widely used market penetration strategies is to enter new territories. However, you must move into territory that will help bring in new customers and increase your organization’s revenue. You may need to do market research before moving into new territory to know your target audience well.   

Develop an Alliance 

If you do not want to go up against specific competitors, you can form an alliance with them. Some companies enter into partnerships through co-branding or mergers. Note that your original brand may disappear if you decide to merge with another company.

Another way to build an alliance is through a joint marketing campaign. Instead of working against your opponents, you can expand your audience, build brand awareness, and generate valuable content.

The benefit of co-marketing is that you can reach more leads and increase conversion by spending fewer resources. Co-marketing will cost less, and you and your partner will both reap the rewards if your campaign succeeds. 

Market Penetration Examples at Local Markets

To establish the effectiveness of market penetration, we’ll use Coca-Cola as an example. Coca-Cola is one of the most popular brands globally and has been on the market for almost 100 years. 

Due to the brand’s incredible strength, Coca-Cola can use market penetration yearly by associating the beverage with Christmas. Both the brand and Christmas have red colors. The company also reduces its competition by partnering with its competitors. 

It also changes its marketing to sell to people with different needs. For example, when Coca-Cola introduced Diet Coke, it was a huge hit but only among the female demographic. Men avoided the beverage because they considered it to be feminine. 

The brand then launched Bloke Coke and Coke Zero. Both have the same taste and benefits, but Coke marketed it to capture male attention.   

Practical Steps 

The purpose of market penetration is to attract your competitors’ customers by adjusting your pricing, maximizing your marketing efforts, and making changes to existing products. If you implement your strategy correctly, you can dominate your market and increase your market share. 

When looking for methods to promote your business, you should consider strengthening your online presence first. With a professional website in your arsenal, you can:

• Conduct surveys to offer your target audience the best product/services possible;
• Add a sales page for selling services/products and listing their features and customer feedback;
• Link the website with your social media pages;
• Write a blog to demonstrate your expertise in the business;
• Add case studies and portfolio of your works;
• Communicate your values to the customers.

Do you have a marketing penetration formula that you use? What strategies do you use to enter new markets? Leave us a comment below. We are always happy to learn more from our readers.  

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Market Penetration Strategy Guide

We take a look at Market Penetration from the Ansoff Matrix… 🥇

Table of Contents

The Ansoff Matrix is a framework that provides four classifications of strategy. It’s designed to help you work through potential strategic options and establish the future focus for your business. You can read more about this model in our guide to the Ansoff Matrix .

In this article we’ll look at Market Penetration. It’s the lowest risk strategy because it does not involve significant change for your business model or operations. Although it may not always be the box to ultimately focus on to ensure the future of your business, we would suggest it is always an important starting point.

What is Market Penetration?

Market Penetration is about digging deeper into your existing market by selling more of your current product or service. A Market Penetration strategy is focused on growing revenue by increasing market share.

It may be that, during these turbulent times (or any time for that matter), you are considering a Product Development, Market Development or Diversification strategy to bring about growth for your business or to ensure its survival. Those strategies are all about diversifying your operations to some extent.

However, you’ll see from looking at the Ansoff Matrix that those three strategies come with higher risk than the first box in the model.

After all, any diversification strategy is going to need funding of some sort, and your existing revenues and working capital are at least the easiest way to do this. Before & during any sort of diversification strategy, lots of businesses don’t focus enough on making sure they are doing a brilliant job selling their existing products to their existing customers – this is crucial as it provides important revenues that fund things.

So, especially at the moment with the turbulence going on, what should your business be doing to make sure you are maximising revenues from your existing activities to drive your growth or fund a more viable future?

What preparation should be done for Market Penetration?

When focusing on a Market Penetration strategy you need to revisit your customer and market assumptions on a regular basis and be prepared for tweaks and changes based on changing market influences, consumer behaviour and the political landscape.

Reassess who your core customer is

It may be that your old definition of who your core customers are, even a few months old, is now inaccurate as things have changed.

Reassess your core value proposition and messaging

Again, if your customers have changed then your value proposition and messaging will need to. Check this out!

Test out your revised messaging

Do this in small ways. Don’t go revamp the website, just test the messaging out in conversations to see if it gets traction.

Create a temporary price/offer

To support everything we suggest doing in this guide, why not sharpen your pricing or your offer in some way, for a temporary period.

Make sure out have some decent sales & marketing tools

You don’t need to go overboard, but you should have some basic CRM capability in place and perhaps be using some of the easier automation tools in it, even if it’s just message templating. You should be trying to drive some efficiency in what you are about to do.

Next Steps…

Some preparation and a bit of organisation are key precursors to running successful campaigns which form the backbone of Market Penetration.

You’re now ready to focus on the Growth Tactics – download the guide below for more information.

Strategically this is all good practice, it will improve your business today and you can use this increased working capital to help fund any diversification that can help drive your growth tomorrow.

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How to Build a Market Development Strategy [Free Planning Templates]

Published: April 27, 2023

Your business is getting by just fine – but still, the questions remain: Could you be selling more? Is there an opportunity to increase market share? Is there any way you could further your product diversification efforts?

Companies hoping to increase revenue can do so in many ways — such as increasing advertising budgets, expanding sales teams, and investing in product development. However, one often overlooked way to strengthen your gross sales is a purposeful and expertly executed market development strategy.

In this article, we'll explain what market development is and how you can employ it to grow your business. Then, we’ll take a look at some examples of market development strategies that work for top businesses today.

What is market development?

Market development is the expansion of your total addressable market (TAM) and how much market share you can expect to claim. The Ansoff Matrix (or Product/Market Expansion Grid) illustrates how a company might expand its TAM across four categories: market penetration, market development, product development, and diversification.

Each category rests upon two axes — one for market and one for risk. A company can expand its efforts into new or existing markets. Each poses more or less risk to the business.

Market Penetration

When businesses want to expand within their existing markets with low risk, they might attempt a market penetration strategy.

In this scenario, TAM increases because by offering a new product or service, a business can effectively increase the maximum amount of revenue it can attain from its existing customer base. A product launch is an effective way to execute this strategy.

Free Marketing Plan Template

Outline your company's marketing strategy in one simple, coherent plan.

• Pre-Sectioned Template
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You're all set!

Click this link to access this resource at any time.

Product Launches

A company may release new iterations of a product they already sell successfully within the market. These iterations could include an improvement to the product that makes it a better fit for customers' needs, an improvement to the performance of the product, or any other changes you can reasonably market as added value.

The purpose of launching a new product is to generate excitement and buzz around the brand to increase sales.

Product Development

A more high-risk way to expand within an existing market is through product development. Even with its risk, make no mistake — this market development strategy can be rewarding.

Developing new products is a delicate process. Businesses should be keenly aware of their market, as market interest is a driving factor for product development.

If the audience isn’t receptive due to a lack of education about the product, a poor marketing campaign to promote the product, or even poor timing of launching the product, this strategy can be difficult to execute. However, companies that have failed at developing new products usually have in-depth learnings to apply to their next market development strategy.

When it comes to creating new products, consider the category of your product. Entering a space with many competitors will be a different experience than building something in a disruptive category.

“If you launch a product in an existing category with existing competitors, you’re playing by their rules and competing on their terms,” says Adrienne Joselow, director of product marketing at HubSpot. “If you instead launch a disruptive product that changes the category, you’re competing on new benefits where you clearly win — you change the game.”

Beyond making new products, product development comes in many forms. Here are a few examples.

If a business has been around for a long time or has been in hot water, it’s possible that the market has become disconnected from the brand. This can happen due to a lack of advertising around the brand itself, outdated positioning of a product, or distrust within the market.

Companies can rebrand themselves to reconnect with their existing market while positioning themselves as a viable option among the competition.

Adjusting the packaging of a product, offering a new size, flavor, or color, or even changing the name can help a company rebrand a product to have a better position within its existing market.

Another way to gain traction within an existing market is for a business to make its products more accessible or desirable through its pricing.

Repricing doesn’t necessarily mean lowering prices, although that is one way to execute a product development strategy. It could mean shifting the brand within the market to showcase value or luxury, thus justifying a rise in prices to capture those consumers.

Market Development

It’s possible to take a less risky approach when expanding into new markets. To develop a market, a business may offload some of the risks.

In this example, TAM increases because a business is adding more people to its target market — thus being able to service new customers without investing in a new product line. Here are a few ways a business can develop a new market.

Geographic Expansion

Research can reveal markets that are suitable for a business to thrive within based on where the business currently operates. Geographical expansion can work for both brick-and-mortar as well as online businesses.

Franchising

Giving individual business owners the right to use the brand and trademarks associated with a company is another way to expand into a new market without high risk.

In franchising agreements, the franchisee usually pays an upfront fee to the franchisor to obtain the rights to operate the business.

Diversification

Occasionally, a business may step out of its normal operations and market to create a product for a completely different industry and market. For this reason, diversification can present a major risk to the business, but it can be very rewarding if it’s carried out effectively.

Similar Product Diversification

A company may realize that the raw materials or byproducts of the goods they sell can be repurposed into a completely new product that can be marketed to a different audience than the one currently purchasing its products.

Unique Product Diversification

Rather than using existing products, a company may take a completely unique approach to penetrate a new market by offering a product or service that is different from anything offered in its industry.

How to Create a Market Development Strategy

• Research your development opportunities.
• Set your growth goals.
• Create your marketing plan.
• Go to market.
• Analyze your results.

The decision of when and how to develop your existing market should be a methodical process. Just because your business has struck lightning once does not mean your new expansion plan is a guaranteed success.

Because of that reality, follow these steps and use these resources to determine if you should develop your market, how it should be developed, and whether or not the initiative is successful.

Free Market Research Kit

5 Research and Planning Templates + a Free Guide on How to Use Them in Your Market Research

• SWOT Analysis Template
• Survey Template
• Focus Group Template

Step 1. Research your development opportunities.

It's always tempting to go after the hottest trends — whether that means adding more areas of focus to your consulting business or adding more items to your restaurant menu.

However, before you spend time, money, or resources on developing your market based on trends, take these steps to determine if the expansion is worthwhile.

Review Your Buyer Personas

Featured Tool: HubSpot Buyer Persona Templates

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When expanding your market, you face the potential need for net new or revised buyer personas, which are semi-fictional representations of your ideal customer based on market research and real data about your existing customers.

Consider the motivations, demographics, and backgrounds of your new target market to help you decide whether or not the development initiative makes sense.

Research Your Market

Featured Tool: HubSpot Market Research Kit

Download This Kit

Understanding your hypothetical positioning in a market is key before attempting to enter it. To that end, conduct market research exercises like Porter's Five Forces Analysis or a SWOT Analysis to determine your strengths, weaknesses, opportunities, the threat of substitutes, or other attributes compared to competitors in this new market.

Additionally, you'll want to calculate market penetration before moving forward with any plans to expand.

Survey Your Customers

If you're hoping to expand your current product line to generate more revenue from existing customers, make sure your intended expansion will be warmly received. Asking yourself why this development makes sense coming from your organization is a good first step.

However, talking to and surveying your customers to see if your proposed expansion is beneficial to their lives is a necessary proof point before expanding your offerings as a business.

Step 2. Set your growth goals.

A successful market development will come with added sales, profit, employees, customers, products, users, locations, or some combination of these criteria.

Because there's so much on the line, develop goals for which facets of your business you intend to grow, in addition to what your growth goal for each criterion is.

For example, by adding one more location, you may set the following growth goals:

• Increase customers by 90%.
• Increase revenue by 100%.
• Double annual profits after recouping the initial investment.
• Increase employee headcount by 20 people.

During this stage, you should also consider the requirements needed to help you hit your growth goals, such as initial funding, tools, and software to help you get the initiative successfully up and running.

Lastly, the most important metric to measure before attempting to expand or develop your market is ROI. In this step of the process, compare the upfront costs of developing your market as intended with the projected revenue numbers of a successful expansion.

If the ROI is not encouraging enough to move forward with, you may need to go back to the drawing board and determine a new growth strategy.

Featured Tool: Growth Strategy and Planning Template

Download the Template

Using the template above, outline your growth goals and strategy to lay the foundation for your market development initiative. This template will help you plan out the steps necessary to achieve your goals and help you determine whether or not they are realistic for this project.

Step 3. Create your marketing plan.

An increased market means an increased need for effective marketing.

To generate demand — or to capture existing demand in your market — make sure your marketing plan is up-to-date and reflective of the initiatives it will take to grow your market share to its desired level.

You’ll also need to make sure each of your offerings is differentiated. Customers should know what makes your products different from each other and from other products in the market.

“Messaging, messaging, messaging,” says HubSpot’s Adrienne Joselow. “Create a narrative that establishes a sense of urgency. Lean into what makes your product special — and how you can help your customers get that magic.”

Featured Tool: HubSpot's Marketing Plan Template

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Document your marketing plan supporting your market development with the template above, and make adjustments to it as needed to ensure you're reaching your market in an accurate, appealing, and consistent fashion.

Consider all of the following initiatives and how they'll play a role in generating more revenue in your newly developed market.

Email Marketing

Will you communicate with existing prospects via email to alert them of your initiative? Do you have a list of saved contacts who expressed interest in what you sell, were unable to make the purchase, and might now be able to purchase from you?

Social Media

Do you have organic and paid initiatives to generate buzz and spread the word to grow awareness on social media?

Local Marketing

If you're developing your market on a regional level, are you working with local publications, PR agencies, or advertising platforms to appeal to nearby potential customers?

Content & SEO

Do you have website and blog content planned to capture the interest of website visitors hoping to learn more about what you're selling?

When building your blog, consider the range of topics you’ll cover. If you cover many subjects, have experts devoted to managing different sections of your content, suggests HubSpot Marketing Manager Clint Fontanella.

“Group your content together so that an expert in one or a few related topics can focus their efforts on growing that type of content,” Fontanella says. “This way, they can pay closer attention to the nuances of that SERP landscape and tailor the content to the specific needs of the audience.”

Step 4: Go to market.

The time has come: Your research and planning are complete, and you're ready to formally enact your development strategy, whether it's opening the doors of your new location or making your new product available for purchase on your website.

But before you start collecting revenue, there are a few final steps to take — specifically, aligning your team on the best way to conduct this go-to-market launch.

Go to market successfully by managing three imperative internal tasks, all of which can be done with this Product Go-to-Market Kit :

Campaign Planning

The campaign plan should be a one-stop shop for anyone who has a stake in the success of this project. It should provide a general purpose for the market development project in addition to the tactical and strategic elements team members need to adhere to in order to see the project go off without a hitch.

Sales Planning

The sales plan should provide more specific insights for the sales team – especially regarding overall projections, team or individual goals, and strategies for how the organization intends to meet these goals

Team Email Updates

For the company at large, particularly for individuals who need to be informed but may not have set tasks to complete, team email updates are a staple of communication during market development.

This messaging should contain a status check for the launch timeline and outstanding tasks, and any notifications the company should be aware of during their day-to-day work.

To centralize your internal planning and communication efforts during your market development process, use the HubSpot Go-to-Market Planning Kit .

Step 5: Analyze your results.

Once you've taken the necessary actions to develop your market, the work has only begun. After launch day, you'll need to be sure customers are satisfied, products and services are high-quality, employees are retained, and, most importantly, goals are met.

Start collecting sales data as soon as possible so that you can begin analyzing whether or not you'll meet your projections. If not, you may have to determine a plan to either adjust your goals to become more realistic or adjust your strategy to ensure your goals are met.

Once data is available, make sure you're presenting your findings accurately and clearly so that stakeholders can fully understand what the results are, how you achieved them, and what the next steps of your market development strategy are.

“Test and iterate on your way to launch, through launch, and beyond. Stay agile. Figure out what works, what doesn’t, and what could be with adjustments,” Joselow advises. “Don’t be afraid to pivot.”

Featured Tool: Marketing Reporting Templates

Available in PowerPoint, Excel, and Google Drive, these templates will help the project driver communicate the results of your market development strategy to your team.

The Benefits of Building a Marketing Development Strategy

It’s easy to get caught up in the excitement of extending to new markets. However, to be successful, you must innovate with intention and organize the chaos from the outset.

“Marketing’s job is never done. It’s about perpetual motion,” states Beth Comstock, Former CMO and Vice Chairman of GE. “We must continue to innovate every day.”

With thorough planning, you can create a robust strategy that can better take advantage of new and emerging opportunities.

Other benefits of refining your marketing development strategy follow.

You can get an edge over competitors.

Creating a market development strategy that attracts a new audience means you may end up the only supplier in the game.

By getting creative and adjusting your marketing to prove a fit for new buyers, you’ll have less competition and more market share before other producers wise up to what you’ve accomplished.

You’ll reduce risk through preparation.

One of the known risks of moving to new markets is the unpredictability of reactions to your offerings. Knowing this, your market development strategy can include tactics that pave the way for success. One effective tactic to try is A/B testing. This presents two variations to your target audience, tracks the results, and determines which variation is more effective. Surprisingly, only 17% of marketers use landing page A/B tests to improve conversion rates.

One example of A/B testing beyond the landing page could be creating more than one billboard design to present in new geographic locations. Some communities react more favorably to reds vs. blues, or straightforward ads vs. clever ones.

Having a few prepared as part of an A/B strategy to analyze the results can provide insights into how best to invest future marketing dollars in that region.

You can brave the unexplored.

Confidently open doors for new opportunities to develop by folding an experimental budget into your market development strategy. Making a safe space for leaning into creative or unorthodox ideas is smart innovation toward a big payoff.

Baking in the financial risk from the beginning enables you to control financial losses and take bigger, bolder leaps.

Market Development Strategy Examples

1. carl’s jr. and hardee’s — geographic expansion.

Although these two companies started as separate restaurants — Carl’s Jr. on the west coast and Hardee’s on the east coast — they merged in the late 1990s to become one company under two names.

From a high-level perspective, this might seem like a branding and marketing nightmare, but within their respective geographic markets, the different names have been successful.

Carl’s Jr. took the opportunity to acquire Hardee’s, thus expanding the burger chain across the country, becoming one of the largest burger chains in the United States.

2. Popeyes Louisiana Kitchen — Market Penetration

Sometimes, a market development opportunity can appear when you least expect it. That was the case with Popeyes Louisiana Kitchen.

The company’s brand was so well-integrated into its marketing operations that a simple tweet in response to Chick-Fil-A prompted a tumultuous beef over which brand had the best chicken sandwich.

Once the Tweet gained traction, Popeyes quickly capitalized on the opportunity to sell more of a product they had recently launched.

Although some logistics issues caused supply and demand imbalances, the brand was able to maintain a stronghold on the market once the sandwiches were back in stock.

In Q2 of 2021, Popeyes was still running TV ad campaigns for the chicken sandwich — more than two years after the incredibly successful product launch. By Q3 of 2022, however, the buzz around their chicken sandwich buzzed off. They shifted their strategy to become more convenient for customers to access, and to create a more consistent experience for those using online ordering.

This is a solid example of what our CTO and Co-Founder Dharmesh Shah meant when he said, “Many companies have forgotten they sell to actual people. Humans care about the entire experience, not just the marketing or sales, or service. To really win in the modern age, you must solve for humans.”

Popeyes plans to add 200 more locations split between the U.S. and Canada.

3. The Lash Lounge — Franchise

Since 2010, The Lash Lounge has been scaling its presence across the United States through franchising. As of 2020, the company has grown to 108 locations, most of which opened around 2019.

Franchising helped this company expand into new markets with relatively low risk. The Lash Lounge team trains the new franchisees on their techniques and immerses them in the culture to create one cohesive team that doesn’t feel disjointed.

4. Unilever — Diversification

Today, we know Unilever as the parent company of some of the most notable brands like Dove, Breyers, and Hellmann’s. However, the company initially went into business selling soap.

After realizing that the ingredients for making soap shared similarities with those needed for making margarine, they diversified and expanded into a new market with a new product. Over time, Unilever created and acquired new brands in the soap, cosmetics, butter, and ice cream industries, essentially diversifying its product line and market.

Developing Your Market

Before you follow the latest trend in marketing, take a moment to analyze your strategy thus far to forge a path that will yield success.

By planning a market development strategy, you’ll have the opportunity to assess your company’s risk tolerance and understand where your business stands within the market. You can then turn your market development idea into a reality.

Editor's note: This post was originally published in November 2020 and has been updated for comprehensiveness.

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Moscow International Business Centre (MIBC)

The Moscow International Business Centre (MIBC) is an ambitious engineering project in the centre of Moscow. The site is

Estimated Investment

$12 billion

Construction Started

Moscow, Russia

Project Type

Business complex (city within a city)

CITY JSC, Moscow City Government

The Moscow International Business Centre (MIBC) is an ambitious engineering project in the centre of Moscow. The site is on an old urban area near the river embankment. The goal of the project is to create a new business district within the city.

The whole complex is to be built on a 100ha site (divided into 30 plots) designated for new development on the Krasnopresnenskaya embankment. The management company for the project is CITY Joint Stock Company (CITY JSC), a company first set up in 1992 as a collaboration between the Russian government and private investors.

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The project was first launched in the early 1990s but has been stalled for much of the last 10 years due to a lack of investment. In 2003 the project started to attract investment again and has been gaining momentum ever since.

PLOT 1: BAGRATION BRIDGE AND TOWER 2000 OFFICE COMPLEX

The first major building constructed in the MIBC project on Plot 1 was the Bagration Bridge (pedestrian bridge) and mall, completed in 1999. The second project was the Tower 2000 office complex, a multi-use business complex begun in 1996 and completed in 2001. The building is 106m high and has 30 storeys above ground and four storeys below. The total floor area of the complex is 60,000m².

The underground area contains parking garages, restaurants, retail areas and a fitness centre. Floors 3–15 and 17–26 are business offices while floors 8 and 27 have a media centre, large exhibition hall and piano bar.

The business areas are served by structured cable network, fibre optic cable, satellite broadcasting, Wi Fi and ADSL Internet access, automatic digital telephone exchange with integration of services, local broadcasting system, municipal broadcasting network, electric timing system, data collection and processing system, audio and video systems, simultaneous interpreting system, conference system, video projection system and security systems including biometric access control and a monitoring system.

The tower also has a central air conditioning system, auxiliary exhaust ventilation system, cooler and heat supply systems, Uninterruptible Power Supply system (UPS), automatic fire security system, automatic volumetric fire-fighting system, sprinkler system and automatic smoke removal system.

The general contractor for the tower was Promstroytechnologia-M Company Ltd. The facade of the tower, which is made of glass and structured concrete, was constructed by Transwall Technology. The tower is equipped with 17 computerised rapid elevators, supplied and installed by Schindler Aufzuege AG, and an outer panoramic elevator, supplied and installed by Kone Lifts. The exterior lighting equipment was supplied and installed by Thorn.

PLOTS 2 AND 3: MOSCOW WEDDING PALACE AND CITY SQUARE

The sites designated by plots 2 and 3 are now to be developed as the Moscow Wedding Palace and City Square. This will include a city square, an underground retail complex and a 14 storey multipurpose complex, which will include the Wedding Palace, banquet halls, restaurants, shops and a hotel.

The developer is Capital City Developments. The architect is Mosproject – 2. The construction started in 2005 and is scheduled to be complete by the end of 2007.

PLOT 4: AQUAPARK

The Aquapark leisure complex was started in 2002 and was completed in 2005. The site occupies a 1.74ha area adjacent to Krasnopresnenskaya embankment. It includes:

• Complex of swimming pools, water mountains and leisure attractions, restaurants and cafes and retail areas (24,352m²)
• Five-star, 30-storey hotel complex (54,640m²) built on a six-storey podium containing retail areas, restaurants and nightclubs
• Parking to accommodate 425 vehicles (13,050m²)
• The aqua park will be connected with a mooring on the Moscva River

The developer of the complex was Aqua-City Palas Company Ltd. The project required an estimated investment of $230 million. The general contractor was Liard Stroy Ltd and the designers were Mosproekt-2 of Russia and Tkhomesto Engineering of Finland.

PLOTS 6, 7 AND 8: UNDERGROUND MALL AND METRO STATIONS

A large underground complex containing the central core of the MIBC, an underground mall and two metro stations is located on these plots. Construction started in late 2001 on the 5.1ha site and was completed in mid-2004. The complex has a total floor area of 150,000m² and includes:

• 35,000m² shopping mall
• 20,000m² multi-purpose performance complex
• 10,000m² dancing complex
• 15,500m² sports and leisure complex
• 30,000m² ‘Wonderful World of Entertainment’ theme park
• 7,000m² restaurant complex
• 30,000m² hotel

The complex developer was CITY JSC and the designers were Mosproekt-2. The construction engineers were Bovis Europe and Jones Lang Lassale of the UK.

PLOT 9: CAPITAL CITY PROJECT

This project involves the construction of two connected tower blocks and a dome. The towers will be of 73 and 62 storeys high, with a 16-storey domed building containing an atrium. Connecting the buildings will be a podium building with three storeys above ground and 4–6 below ground.

The lower levels of each tower will be for office space (200,000m²), while the upper levels (above 80m) will be residential and the dome will be used as a retail area. The investment for the project is $250 million.

The developer is Capital Group; the construction engineers are Bouygues Construction and the architects are Erick van Egeraat Associated Architects of Holland. Construction has been underway since 2005 and the project is scheduled for completion in mid-2007.

PLOT 10: NABEREZHNAYA TOWER

This project involves the construction of a new office and apartment complex consisting of three A-Class buildings 16 (86m), 27 (135m) and 52 (250m) storeys high, with a total floor area of 220,000m². The construction began in mid-2003 on the 2.55ha site with the smallest of the three buildings.

The first building was completed in autumn 2004. Enka, a Turkish construction company , is carrying out the development and construction. Enka has invested a total of $150 million so far. Work is continuing on the other two buildings with completion expected in 2007.

PLOTS 11 AND 12: MIXED-USE TOWER BLOCK

The major project on these plots will be a 300m, 75-storey, mixed-use tower block with over 204,000m² of floor space. The facilities will include commercial and government offices, residential areas, retail space, leisure and health centres and a four-star hotel.

Offices will occupy the floors 4–45, while apartments are on floors 48–66. The building was designed as a two-tier skyscraper, 30 floors in the first tier and 37 in the second one. The second floor of the building will be occupied by a casino. The 47th floor will be occupied by a gymnasium.

The designers for the project are Swanke Hayden Connell Architects and the investors are Techinvest, who are investing $270 million. The contractors for the construction are Summa, a Turkish development company. Groundwork was carried out by Kaskatas. Construction on the building started in the third quarter of 2004 with completion scheduled for late 2006.

PLOT 13: FEDERATION OFFICE COMPLEX

The Federatsiya (Federation) office complex is to consist of two towers, one 57 storeys high and the other 87 storeys (345m), and a podium. The 87-storey tower will hold offices and the 57-storey tower will include residential apartments and a hotel. The total floor area of the complex will be 240,000m².

The podium will have three to five levels and 30,000m² of floor space and will contain retail areas, banking facilities, cafes, restaurants and leisure facilities. The complex will have 14 lifts built between the two towers, including four ‘Shuttle’ round-observation lifts.

Stroimontage and NIKoil Financial Group will invest more than $500 million in the project. The architects for the project are P Schweger, S Tchoban and A Asadov of Germany. Stroimontage is the general contractor for the project. Construction started in April 2004 and the complex is scheduled for completion by 2008.

PLOT 15: CITY HALL AND DUMAS

Plots 2 and 3 are owned by the Moscow City Government and original plans were for the new City Hall and Dumas (Parliament) buildings to be located there. However, these buildings will now occupy Plot 15.

The construction on Plot 15 consists of four 70-storey interconnected 308.4m buildings. The project started in November 2005 and will be finished by the end of 2007.

It is expected that all government administration will be accumulated in the new complex to provide better organisation, allowing the buildings currently in use to be sold.

The four skyscrapers will be connected by several two storey bridges between towers and eight storey bridges at the top. The highest bridges will be built in shape of letter ‘M’ for ‘Moscow’.

PLOT 16: RUSSIA TOWER

Plans for a 600m-tall tower to be built in Moscow to designs by British architect Sir Norman Foster were released in March 2006. ST Towers is the developer behind the project and is part of the ST Group.

The Russia Tower will be more than 50% higher than the Empire State Building and is to be built within the Moskva-City development on Plot 16 near the site’s border with the Third Ring Road. It will overshadow the 430m Federation Tower under construction at Moskva-City, which developers say will be the tallest building in Europe when it is completed in 2008.

The 420,000m² tower is a striking design comprising three blade-like structures arranged in a trefoil-like plan around a central core and tapering sharply toward the top, with part of the steel structure exposed on the outside like an exoskeleton.

Described by the architect as a vertical city, the tower is to house parking and retail space on nine underground levels, a public ice rink on the first floor under a spacious, pyramidal atrium, a hotel with serviced apartments above, 24 floors of office, high-end apartments on the top levels and a public observation deck at the very top. The resident population of the tower could be 25,000.

The Russia Tower is billed as an environmentally friendly project, maximizing natural ventilation and lighting, with solar cells, the collection of rainwater and snow to reduce water demand and the recycling of energy between areas with varying levels of demand. In addition, atria several floors high are to be spaced throughout the building’s central core and decorated with plants, providing the luxury apartments on the upper floors with private gardens in the sky.

The construction of the tower is expected to cost about $1.5 billion; of this about $150 million to $200 million would be supplied by ST Towers. Plans for the tower have been approved and it should be finished by about 2010. Construction has not yet started.

PLOT 17 AND 18: MULTI-PURPOSE OFFICE-HOTEL COMPLEX

The multipurpose complex will include two towers (80 and 78 floors), with a common underground space for parking. The high tower will contain office premises and the second tower will be a hotel.

The complex will also contain a roof-top restaurant with a panoramic view, cafes and bars, conference halls and billiard club. The architect is Skidmore, Owinds, and Merrill LLP. No dates have yet been announced.

PLOT 19: NORTHERN TOWERS

An office complex is being developed on this plot by ZAO Severnaya Bashnya. The Northern Towers will consist of three buildings – two 12-storey and one 29-storey. These will contain 135,000m² of floor space.

The architect is Project Institute 2 and the construction engineer is Bau Holding Strabag AG (Austria). Interior design in the building will be carried out by ABD Limited, and legal services with regard to lease documents are provided by PricewaterhouseCoopers.

The first phase of Northern Tower is scheduled for shell and core delivery by the fourth quarter of 2006. The marketing and leasing campaign has already started. Raiffeisenbank has agreed to become the first tenant of the complex.

Northern Tower will feature spectacular atriums, prime office premises and a multi-level parking for 688 cars. There will also be a multi-functional conference hall for up to 200 people, banking premises, restaurants and cafes, a fitness centre with a swimming pool operated by Reebok, a professional dental clinic and a beauty parlour.

POWER PLANT CONSTRUCTION

The power supply for the new MIBC has been a subject of much contention among foreign investors. The complex requires an efficient power distribution system operating at 20kV rather than the more typical 10kV.

CITY JSC and power supplier Mosenergo JSC put forward a proposal in 1999 to the Moscow City Government to develop a new power network for the MIBC, mini-metro, metro junction core, Eurostation and Sheremetyevo-Moscow Rapid Transit System.

The power and heat supply for the MIBC will be provided from three sources: the Mosenergo power station ‘SS-CITY-1’; the district heat and power station ‘Krasnya Prsnya’; and the MIBC power plant on Plot 7A, which entered its first phase of construction in 2002–2003 and is now well into its second phase with completion expected in 2006.

Having established the power supply sources, the next part of the project was the bulk power and distribution network to support the MIBC. Phase 1 of the MIBC power plant has seen the construction of a Gas Turbine Unit (GTU) and Heat and Power Plant (HPP) with a capacity of 50MW and a substation with two transformers for 110V from 20kV and 110V from 10kV and two 63MVA distribution units. The next phase will see an increase of capacity up to 100MW.

The developers of the power plant are CITY JSC and CITY-ENERGO Company Ltd. The contractors for the project are Liard-Stroy Ltd and the designers of the plant were Mosproekt-2 and VNIPI Energoprom.

TRANSPORTATION CONSTRUCTION

The Moscow–Sheremetyevo line is the first phase of the RTS to connect the three satellite airports to the centre of Moscow. This first line, 34.3km in length, will provide interconnectivity between the airport, regional centres and urban junctions and also interconnect with the existing municipal transport system. The project was started in 2001 and eight stations were planned. This stage is now complete.

The developer for the RTS is CITY JSC in collaboration with the City of Moscow; the designer is SNC Lavalin of Canada. The Phase 2 section of the project to extend the line to cover Vnukovo Airport was started in 2004 and is now nearing completion (scheduled to open in 2007).

The RTS development not only concerns rail links to the new commerical centre of Moscow but it is also a development in its own right. The Plot 11 development will include the construction of the new Moscow transport terminal uniting the RTS, three lines of the underground and the intercity bus terminal.

The complex will include transport stations with waiting rooms, boarding areas for VIPs, a hall of customs inspection, left-luggage offices, a 342 room hotel and ticket offices.

For this section of the development Citer Invest B.V. of the Netherlands is the developer, Behnish and Behnish Architekten of Germany are the architects. The investment is $200 million and construction is underway with an expected completion in 2007.

MINI-METRO LINE

A mini-metro line was also constructed to provide transportation within the MIBC and to connect with the historical centre of Moscow. There are three stations, one constructed in Phase 1 of the project and two in Phase 2. The three stations are Dorogomilovskaya, International and Moscow – City.

The length of the line is 5.85km. The engineering and transport contractors were Metrogiprotrans JSC. The line along with the International and Moscow – City stations came into operation in September 2005.

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