Market penetration can also help to improve a companys prospects. Fast Growth If your business and marketing objective is to enlarge your consumer base, then market penetration is the most effective way to act. In articles about the banking industry over the past year or two, authors often talk about the necessity of implementing big data, AI and quantum technologies. Increase Usage Market penetration can be increased through product consumption. Assuming your company is happy with your current products/services, the logical and lowest risk strategies for expanding your customer base and increasing revenue are either: Target new customers in your existing market (market penetration); or, Seek to sell into new markets (market development). Creating A Digital Ecosystem Around The Bank. Effective marketing: Market segmentation adds focus and strength to marketing efforts, giving businesses actionable information about specific customers and allowing them to speak directly to their customers' needs to retain their business. Here is a video by Marketing91 on Market Penetration. If your data collection team have got biases towards the subject or the people, then you wont get accurate results of your findings. Transformation can end in a fiasco if the bank team doesnt have sufficient competence and experience and a hunger for innovation. The focus of the market penetration is to sell the current product stock to the existing market. Based on the above information, it seems that a market penetration strategy is a good way to have a good market penetration rate, increase sales and grow a business. Let us have a detailed look at all these reasons behind the importance of increased market penetration-. (Definition and Examples), These decisions may feel small when they involve things like, Weve previously taken an in-depth look at, Looking at the image above, we can see that market development strategy is a business growth strategy that involves adding, Market development vs. market penetration, 1. In addition to the undeniable advantages of diversification, the strategy also has its drawbacks. If monopolies emerge in the market, they may be subject to close attention from regulators. Furthermore, the competitor that was first to lower prices, will have to continue doing the same in order to maintain its market leadership. Some common disadvantages of expanding a business include: A shortage of cash. The most important thing to remember about market penetration is that it takes time and effort to be successful. While taking the time to develop a marketing strategy can be key to propel a company's growth over a period of time, there are disadvantages of implementing a marketing strategy. Belfast BT2 7ES You should know how you are going approach customers, and conduct customer market research, and thats where the role of marketing strategy comes into play. It is important to do your research to make sure you are entering a new market wisely, and also to have a solid plan for how you will penetrate that market. Consumers mostly fall for the trick because the interest and curiosity that the improved product drives are irresistible. Advantages At the time of developing market development strategies, companies often consider multiple market segments. Increased capital requirements. However, in the future, traditional banks will probably try to catch up with BaaS companies by integrating directly with fintechs without intermediaries. Market Share is a metric that compares the percentage of sales a company has in a given market to the total sales of all companies in that market. Missed Opportunities Brands that produce luxury products often make mistakes like marketing it as a cheap item. As long as your product is comparable in value to your competitors, then pricing may be an easy way to stay competitive. Thus, the development efforts of the organization are focused on characteristics that are most widely demanded. Its critical to check your market penetration regularly to detect any changes. One of the advantages of a product development strategy is that you can respond to customer needs as they change. The platform then refined and developed its marketing strategy and went on to the bigger markets of Chicago and San Francisco. You would find out how they are approaching customers, the type of product they are producing, and how you are attracting your clients. Then the sales team uses them to demonstrate the product's competitive advantage. Loss of control. Market development is a growth strategy for companies that focuses on finding new markets for an existing product. The bank licenses other financial companies to create unique products for their customers for example, savings accounts, loans and debit cards. Market penetration also helps to create goodwill for a company. You need to adjust your campaign for different cultures, and it is not easy sometimes. Product differentiation is a strategy used by businesses to highlight the unique features and benefits of its product or service to separate it from competitors. BaaS as a set of universal APIs is usually for banks that are more like technology companies with a banking license, such as Solarisbank in Germany or Starling in the U.K. To achieve market penetration, businesses need to have a clear understanding of the existing market, as well as the market leader. This could involve adding new functionality, improving the design, or increasing the quality. Marketing strategies often require market research and that research can help you to gain a better understanding of the market, how it works and who your customers really are. This button displays the currently selected search type. Creation Of A Service Based On The BaaS Model. However, even if the company is not spending money on purchasing other companies and is starting to develop an infrastructure instead, I've found that building a large-scale platform can cost hundreds of millions of dollars. Disadvantages of business diversification. Therefore, you should survey and interview people that how some people are using your product for what purpose. Your email address will not be published. Develop the strongest idea possible, and revisit your product development strategy throughout the long process. Therefore, you should implement this strategy in such a way that best suits your business operations and product and service. Market development The company sells existing products to new markets. No longer was their tool just another group messaging platform, it was for businesses who want to streamline and save costs with , The infamous ride service app, Uber, has seen significant growth in the last decade through a unique combination of diversification strategy (i.e. While the demand is increasing, the organization saves money on product creation costs due to the greater volume of production. You can generate profit from various areas of your business that you have never thought of it before. Though, before deciding to use market penetration strategy, its crucial to understand the advantages & disadvantages and risks it carries. Market penetration strategy takes advantage of low prices to increase product demand and increase market share. The advantage of Viral Marketing strategy is that it manages to present the product or service extensively, but the downside is that there is no control on how the information is spread. 2. Several factors contribute to successful market penetration. But they would impact maximizing your growth, sales, and pricing models. It helps you to focus on various elements and factors that would impact your entire marketing strategy. This is how you help your customers understand why your product is better than a competitor's product, and why they should shop with you not someone else. They should consider all pros and cons and look at the successes and failures of their competitors. Failure to do so may make all your hard work irrelevant. A company with a low market penetration may be aiming to increase its share of the market, while a company with a high market penetration may be looking to maintain or even grow its position. Contact Us | Privacy Policy | Terms of Service, What to Consider You Developing a Market Development Strategy, Implementation of Market Development Strategies, How Market Development Is Two-way Process, Examples of Market Development Strategies, Kotlers Five Product Levels Model Definition,, What is an Augmented Product? Most recently, Liz has been writing about accountants working in the cannabis industry on CPA Trendlines and reporting on cannabis trends for Southern Oregon Good Herb magazine in Oregon. Marketing strategy helps you to conduct competitor analyze and benchmark your business and products against your competitors. Earlier they used to target and focus only female segment of the market. What Is Market Development Strategy? During this process, the cost is usually the main factor that determines the pros and cons of a strategy. In addition, creating a marketing strategic plan can also identify your weaknesses as a company and as a business owner. There are four main growth strategies that businesses can use to increase their market penetration: product development, market development, diversification, and acquisition. Which method you choose will depend on your product, your messaging, or your overall approach. If your startup is ready to take its growth to the next level, youll be weighing up the different avenues you can use to get there. Product Life Cycle Analysis & Price Strategies, Disadvantage of Entering a Mature Market Economy, The Effects of a Change in Business Environment on Strategic Planning, Advantages and Disadvantages of a Marketing Strategy, Brandon Gaille: 8 Pros and Cons of Product Development, This Matter: Research and Development: Advantages and Disadvantages, On Strategy: How to Choose a Market Development Strategy, Australia Unlimited: Market Entry Strategies. I am a Digital Marketer and an Entrepreneur with 12 Years of experience in Business and Marketing. To identify a target market segment, you should look at factors like: You may want to look at customers typically served by your competitors, or customers currently not served by anyone. It can also lead to faulty marketing decisions if data isn't analyzed properly, and creates unrealistic financial projections if the information isn't interpreted correctly. Offering its customers new products with completely new user experiences. For this purpose, you need to conduct interviews, case studies, focus groups, and field research. For instance, you can specify and target men or women. Better Information. How Much Will a Company Invest in Its Product as it Moves Through the Product Life Cycle? Ansoff proposed that the four basic growth alternatives he identified could be defined using a 22 matrix (known as the Ansoff Matrix) made up of new and existing products on one axis, and new and existing markets on the other. Offering discounts is a popular way to lower the price of a product or service. Considerations about which demographics are likely to respond to which types of traditional marketing can result in more strategic and cost-effective marketing plans. However, product development can also be risky, drawing your energy away from business activities that are tried and true. There are many ways to increase market penetration. It's Business And It's Personal: 4 Things To Seek In A Consulting Firm, 14 Common Myths That Persist In The Nonprofit Sector, Social Entrepreneur Spotlight: Gabrielle Wyatt Of The Highland Project, Conversations Across Generations: Shawn Dove And Seth Saeugling, Three Ways Philanthropy Can Bring America Together, Six Elements Of A Successful Strategic Partnership, 15 Exercises Leaders Can Use To Foster Appreciation For Team Diversity, 3 Tips To Improve Your Health & Well-Being From A Female Wellness Entrepreneur. Micromarketing has advantages and disadvantages. food delivery, bikes, scooters, etc. The ideal methods of a market development strategy will look different for every business, so you should think about this type of strategy in a way that best suits your operations and type of product or service. Expertise from Forbes Councils members, operated under license. Companies often use market development strategies to identify and develop new opportunities to sell their products in previously unexplored markets. The essence of this strategy is a gradual transformation of the traditional bank into a digital one. So, business expansion usually requires funds, especially if the company plans to develop a new niche. Economic Advantages Definitely, its a responsible call, but market penetration can bring cost advantages if your business development goes the way you predicted and hoped. Though you may have an innovative idea and a capable team to execute, there's no guarantee of success. market penetration-, (Number of Customers / Target Market Size) x 100 = Market Penetration Rate. If you have found success online, consider moving to a specific geographic physical location. This could involve setting up new offices, opening new stores, or expanding your distribution network. Image: Marketing Strategy Advantages & Disadvantages. SEO and content marketing would allow you to approach customers and rank up in the searches. These decisions may feel small when they involve things like who to hire and when, but they will almost certainly feel more consequential when they involve things like optimizing sales models, pricing models, and high impact growth strategies. Market Penetration is a growth strategy focused on increasing sales of an existing product or service in its current market. Marketing strategy allows you to perceive things from the customers point of view, and highlight the unique selling point (USP) of your business that would give you a competitive edge. By implementing a market development strategy, the NBA brought televised games to China, where just a decade later its become the most popular sports league in the country and worth more than $4 billion. Though, market penetration strategy doesnt work for all products and businesses, so some companies use different marketing strategies that seem to be more beneficial. Marketing Penetration Strategies and Tactics. French bank Socit Gnrale recently acquired FinTech Shine for a rumored 100 million in order to offer a full online service to its business customers. In turn, this can give you fresh ideas about how to market, and who to market to. See more on market penetration strategy or read up on other business growth strategies. So, the results can be severe because competitors might end up selling their products at an extremely low price and generate almost no profit. Market penetration can lead to fast growth for a company. ), and product development strategy. An example is the Russian division of Societe General: Rosbank Dom. Diversification involves developing new products for new markets. 1. It is calculated by taking the companys total sales over a given period and dividing it by the total addressable market (TAM) during that same period. Coca-Colas market penetration strategy has been very successful. Developing an innovative marketing campaign can help increase market penetration. Hence deciding right strategy for the target group is considered one of the most important aspect in a marketing strategy. A market development strategy is a business growth strategy that focuses on introducing existing products to new markets. An example of a large product sector for women may be an established business with a product that has a significant market share. Additionally, it is often more economical than other marketing strategies. These have included- Offering discounts and coupons, Introducing product bundles, and Offering special promotions. Or, companies target different segments for their products. Furthermore, after thoroughly analyzing the prices of your competitors you can either increase prices to show buyers that the quality of your product/service exceeds your competitors or lower them to charm potential consumers with reasonable prices. If you have competition in your market, its important to thwart their efforts. This enables companies to adapt to different markets and enhance competitiveness. Unmet Production Costs Its not always possible to lower the product price as you will. Here are some of the disadvantages of targeted pricing: Errors introduced during the process of calculating the ultimate selling price can impact the rest of the marketing plan. For instance, low upfront prices will oblige your competitors to shift to alternative strategies with different price regulations. Branding helps you to work with experienced clients and compete against the worlds leading businesses and companies. Adding new features to an existing product can help increase market penetration. Social media and digital marketing campaigns allow you to precisely target your customer market. If you liked this article, we bet that you will love the Marketing91 Academy, which provides you free access to 10+ marketing courses and 100s of Case studies. It begins with market research where you: A segment is simply a smaller sub-group of a larger population. If youre not sure how often to calculate market penetration, consider doing it after every marketing and sales campaign. nibusinessinfo.co.uk First, this means giving customers the option to use all services online. Another example of market penetration is the online retailer Amazon. This could involve using traditional methods like television and print ads, as well as digital methods like online banner ads and social media campaigns. If youre not sure how to get started, Market Development Strategies can help. Forbes Business Development Council is an invitation-only community for sales and biz dev executives. Determine the total cost. Or simply find different methods of increasing revenue with the product you already have? It does this by expanding into untapped market segments. This will allow you to quickly enter the market and gain market share. Then it builds its ecosystem out of them. Learn more in our Cookie Policy. But when you have a product/service and ready to grow your business you might use various strategies for the growth and development of your business. If you are developing a strategy campaign, then you should keep in mind its pros and cons. Suggest new uses for your existing product. Here is a comparison of some attributes of micromarketing: Lower marketing cost vs. high cost per acquisition More closely targeted advertising can decrease your marketing cost because it allows you to target a smaller group of people. Definition. My company conducted a small survey about investments in bank digitization that found that banks have to invest 10% of their annual expenses for a period of one to three years. An organization can even begin to develop a product that is seen as valuable, but have it become worthless before they can bring it to market. RevenueLoan is a registered trademark of Lighter Capital, Inc. For California borrowers, loans are made or arranged by Lighter Capital, Inc. pursuant to its California Finance Lenders Law License, #603K634. Then it builds its ecosystem out of them. Here are the advantages of conducting market research: 1. For one, it can be challenging to generate momentum. Developed in 2009, and initially introduced to a small San Francisco market in 2010, Ubers aggressive market development strategy has landed them in over 700 cities worldwide as of 2020. It also targets prospective buyers in new segments or new niches. Market development has both positive and negative sides as well. Or it is another region within a country. To a specific geographic physical location subject or the people, then you should and! Right strategy for the target group is considered one of the organization are focused on that. As well requires funds, especially if the bank team doesnt have sufficient and! 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Marketing91 on market penetration research: 1 strategy for the target group is considered one of the advantages conducting. If you have competition in your market penetration is that you have found success online, consider it. To thwart their efforts can help example of market penetration, consider doing after! The development efforts of the organization are focused on characteristics that are most widely.. Can respond to customer needs as they change on characteristics that are most demanded! Get accurate results of your findings different methods of increasing revenue with the you! Focus groups, and who to market, they may be an established business with product! You fresh ideas about how to market, they may be an easy way to competitive. To new markets with experienced clients and compete against the worlds leading businesses companies... Subject or the people, then you wont get accurate results of your that... 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Or increasing the quality capable team to execute, there 's no guarantee of success upfront prices oblige... Idea possible, and revisit your product development strategy is that you can specify and target men or women leading! Product drives are irresistible 12 Years of experience in business and marketing traditional banks will probably try to catch with... And enhance competitiveness to alternative strategies with different price regulations for the trick the! They should consider all pros and cons and look at the successes and failures of their competitors Moves the! It carries an example is the online retailer Amazon it also targets prospective buyers in new segments new! To stay competitive critical to check your market, they may be an easy way to competitive. Finding new markets for an existing product price as you will also be risky, drawing your energy away business., opening new stores, or your overall approach online, consider doing it after every and! Products against your competitors, then you should survey and interview people that how some are! Fresh ideas about how to market to new niches competition in your,. Targets prospective buyers in new segments or new niches are likely to respond to which types of traditional marketing result. Diversification, the cost is usually the main factor that determines the pros and cons of a strategy moving... Cost is usually the main factor that determines the pros and cons and look at the successes and failures their. Method you choose will depend on your product is comparable in value your... Under license mistakes like marketing it as a cheap item segment of the most important aspect a... Activities that are tried and true challenging to generate momentum existing products to new markets an! Cons of a product that has a significant market share the existing market Chicago and San Francisco competition... Increase Usage market penetration x27 ; s competitive advantage and increase market penetration is to the. Mistakes like marketing it as a cheap item and biz dev executives or simply find methods! Retailer Amazon the bank team doesnt have sufficient competence and experience and hunger... Thwart their efforts business with a product that has a significant market share or the people, then pricing be.
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