Definition
It measures the brand popularity. It is defined as the number of people who buy a specific brand or a category of goods at least once in a given period, divided by the size of the relevant market population. Market penetration is one of the four growth strategies of the
Product-Market Growth Matrix as defined by
Ansoff. Market penetration occurs when a company penetrates a market in which current or similar products already exist. The best way to achieve this is by gaining competitors' customers (part of their market share). Other ways include attracting non-users of your product or convincing current clients to use more of your product/service (by advertising, etc.). Ansoff developed the
Product-Market Growth Matrix to help firms recognize if there was any advantage to entering a market. The other three growth strategies in the
Product-Market Growth Matrix are:
- Product development (existing markets, new products): McDonalds is always within the fast-food industry, but frequently markets new burgers.
- Market development (new markets, existing products): Apple introduced the iPhone, in a developed cell phone market.
- Diversification (new markets, new products):
Purpose
Often, managers must decide whether to seek sales growth by acquiring existing category users from their competitors or by expanding the total population of category users, attracting new customers to the market. Penetration metrics help indicate which of these strategies would be most appropriate and help managers to monitor their success. These equations might also be calculated for usage instead of purchase.