Market Penetration Strategies – 6 Ways to Increase Market Share in Your Industry

A market penetration strategy is an approach to increase a company’s market share, customer base, revenue and profits by capturing their competition’s customers. If you’re attempting to enter a new market altogether, you’d instead be deploying a diversification strategy.

6 market penetration strategies are commonly deployed to increase market share. In this article, we weigh the pros and cons of a market penetration strategy and thoroughly explain the top 6 strategies designed to scale market presence, grow customers, and increase profits.

What is a Market Penetration Strategy?

A market penetration strategy is a tactic to increase a company’s market share, customer base, revenue, and profits by capturing its competition’s customers.

This can be done by increasing product benefits/features or implementing techniques to persuade competitors’ customers to purchase your alternative.

If you’re attempting to enter a new market altogether, you’d instead be deploying a diversification strategy. These typically focus heavily on brand awareness and a little less on sales.

When Should You Target a New Market or Audience?

Market penetration requires a sizable investment of both time and money to be successful. Brands should first have a clear market position, a defined target audience, and a full understanding of their customers’ lifetime value (including cost per acquisition) before attempting to expand.

With a sustainable business plan already in place, only then should you prepare to further grow your business outside of your established market position.

6 Effective Market Penetration Strategies

1. Product Improvements & Upgrades

Customers want and expect the best products and services offered. Improving and upgrading existing offerings is one of the best ways to increase value that will grow your customer base and market share.

Adding additional features or an upgraded design that customers want are benefits worth switching companies for. For companies providing software as a service (SaaS), this can also include a more user-friendly design.

Providing more value to your customers in the form of an improved product or service will increase market share.

Focus your resources on creating the highest value improvements to your product and the market will certainly support you. Your current customers will happily stay, and the competitors’ customers will have no choice but to jump ship.

A common mistake businesses make is building out features or improvements that their customers don’t actually want. Product research can be easily conducted by asking customers what they want and finding out their current questions and concerns.

Use surveys, request feedback, or talk to your sales & marketing team who communicates directly with customers to get a sense of their wants and desires.

2. Adjust Product Price

Another way to increase value to consumers and grow your customer base is to adjust product prices. Penetration pricing is when a product is priced below market value to entice competitors’ customers to switch to a more price-friendly, valuable alternative.

This strategy is most commonly used for newer and less established products or when the market isn’t particularly loyal to specific brands. Sales & promotions are effective ways to manipulate your price to incentivize new buyers but increasing or decreasing prices too often can lead to negative perceptions about your brand.

Companies that constantly discount or reduce prices can be seen as cheap or demonstrate a lack of sales and success.

A business can lower prices initially and gradually increase prices as features/benefits are added and demand grows. Keep in mind that consumers may associate your brand with lower price and lower quality goods/services if you don’t set the pricing strategy appropriately.

Make sure you consult your customer acquisition costs and the customer lifetime values before adjusting your product price.

3. Increase Sales & Distribution Channels

Opening a new distribution channel will increase your market presence and provide access to new customers, making it quite a straightforward market penetration strategy. You could sell your product at new stores, on different online platforms, or using email marketing, online marketing, and telemarketing.

When adding new distribution channels, don’t lose sight of your primary distribution channel that serves the majority of your customers.

Add new distribution channels one by one so you can provide adequate resources to launch your product through different mediums.

For example, you may first want to focus on your retail presence and direct-to-consumer sales on your website. After establishing your market position you could introduce email marketing campaigns to make your product available on Amazon or explore a partnership with leading department stores. 

Tailor your content, advertisements, and even your marketing messages specifically for each distribution channel.

4. Widen Product Scope

You can increase current market share by widening the scope of products you offer without diversifying into new markets. An example of this would be offering multiple variations of a specific product in different colors. A service or software business could combine services into various packages or bundles.

This can be a costly strategy for businesses who sell physical products to deploy as cost-of-goods and manufacturing costs will rise initially. It can also open you up to vast amounts of new customers by covering a wider base of their needs.

Just as you should when making product improvements, consult your customers to ensure what you develop for them will be effective and of extreme value.

5. Advertise Aggressively

By increasing your advertising budget you can reach a larger audience and scale your market presence. You can advertise through new channels or double down on the marketing expenditures that currently work best.

Aggressive advertising is much broader than just upping ad spend. You could produce a campaign that directly targets an individual competitor (or their product). This is usually done by emphasizing your product’s superiority over a market leader.

These types of campaigns are often used by larger brands such as Coke vs Pepsi, Dawn vs Tide detergent, or the classic Apple Mac vs Windows PC ad battle. The reason for this is that big brands like these share a large percentage of market share with one (or few) other major players.

When deploying this type of strategy make sure you have solid reasons to believe that defend your claims.

It would also be advised that you have a larger or equal ad spend budget than the competitor(s). The last thing you want is to start a war with a company that could crush you by the sheer weight of their bank account.

6. Influencer Marketing Campaigns

Influencer marketing campaigns can be highly effective for expanding market share by increasing brand awareness and trust. Partnering with the right influencer(s) can drive sales, revenue, and momentum very quickly.

Finding the right influencers who share your brand values while creating content that resonates with your audience can be tricky.

If you’re thinking about exploring influencer market campaigns, you should read our influencer marketing strategy guide for everything you need to know before you begin.

Pros & Cons of Implementing a Market Penetration Strategy

Introducing a marketing penetration strategy into your overall business plan has the potential to increase your profits, customers, and market share rather quickly.

There are pros and cons of attempting to gain market share with a penetration strategy. The benefits of implementing these strategies effectively can be massive.

Like any marketing strategy, it will cost time and money to execute properly… and could fail miserably. Before committing to a penetration strategy you need to thoroughly research and plan to give you the best chance at success.

We’ve lumped together the benefits and drawbacks of implementing a market penetration strategy into your business plan.

Pros of Implementing a Market Penetration Strategy

Challenge Competitors to Change

A penetration strategy intends to take a share of your competitors’ customers and profits. If your marketing strategy doesn’t threaten your competitors it simply isn’t a good penetration strategy. By forcing your competition to change their strategies you will remain one step ahead.

Undercutting competitors’ prices, outdoing them with an updated product feature, selling through unique distribution channels, or being represented by trusted thought leaders and influencers are all effective ways to compel the market to change their strategies.

Increase Cost Efficiency

An increase in market share comes with more sales, profits, brand awareness and trust. In the long run, these can all have a direct impact on the efficiency of future advertising costs and product margins. The investments you make in scaling market presence should be easily recouped by adding new customers.

Spur Growth

Each of these penetration strategies provides an opportunity for incredibly fast growth. More customers, sales, and profits can be achieved.

Successful penetration marketing will boost a brand quicker than many companies are prepared for. Ensure you can meet customers’ needs before committing to scaling presence to maintain great service for new and repeat buyers.

Cons of Implementing a Market Penetration Strategy

Risk of Missing Opportunities

When committing to any strategy, you forgo the resources that could be spent elsewhere. This goes for ALL marketing strategies you deploy. This is why it’s important to diversify your marketing strategies so that winning strategies can pick up the losing strategies. When you find a winner, double down!

Increased Costs

Penetration strategies often cause an increase in cost, at least initially. Developing new product features, adding new product variations, and opening new distribution channels will require research & development, testing, and new advertisements. Adjusting your product price will result in reduced profit margins.

Potential Damage to Brand Image

When done poorly, some penetration strategies can severely damage brand image. Reducing prices too much or too often can both have adverse effects. So can selling a product in certain stores where your product doesn’t belong.

To maintain a strong consistent brand image it’s important to remember the consumer’s perception of your company. Luxury brands should sell high quality, high priced products through appropriate vendors or distribution channels.

Trusted influencers must align with your brand values and share a common audience.

Closing Thoughts

Implementing a market penetration strategy can significantly increase market share if done right. However, companies should choose a fitting strategy wisely and make sure to avoid the many pitfalls that wait along the way. Then, there are no further obstacles to real growth.

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