Market Penetration: Strategies

Introduction:

With the market scenarios becoming more competitive with every passing day, time has come when
businesses and the marketers associated with them ought to adopt a course of action that would give
them a competitive edge before coming to their product. When launching or reviving a product,
marketers ought to ensure that they have penetrated a market enough to promise good sales. In this
age, consumers need to be made aware before a product is made available to them as to what they
should expect and while doing this; a careful balance of perceived benefits and actual benefits must be
maintained. In order to make sure all this, careful and well formulated strategies must be selected.
Another point that should be emphasized at this point is that with this research plan I am focusing at
mass scale penetration with products that would be made available at every nook and cranny.

Background:

The basic purpose that every business serves is to increase the wealth of their shareholders and in doing
so it ensures good performance of the company too. With this information we can fairly easily assume
that the existence of every company depends on how much they sell. Now there are two techniques
that can be used in this regard; market skimming and market penetration and while market skimming
may not be such a bright idea amidst a global recession, market penetration may work wonders for
most businesses.

To give a basic definition of what market penetration is: it is a market technique whereby a company
promotes its products or services as economical and does so in a bid to reach a maximum number of
customers out there. Another reason for adopting this technique is that it gives larger companies a
pricing advantage over their competitors and when once competitors are wiped out of the way, the
survival of an organization becomes much easier.

Literature Review:

Sarah A. Roth (2007)1: Choosing a pricing objective and a related strategy requires you to carefully
consider your business and financial goals the state of market (including its past and future), and the
product and prices of your competition (and possibly their business goals). You want to select objectives
and strategies that will position your product and business for success. Choosing an objective and
strategies that are appropriate for your business at the current time does not prevent you from
changing objectives or employing different strategies in the future as your business grows or changes.

L. D. Makus, J. F. Guenthner and J. C. Foltz (2003)2: For producers of established agricultural

commodities, pricing is probably a new experience because the market place has traditionally provided
this function as a result, pricing maybe an uncomfortable management activity at first. Since knowledge
of cost is an important initial undertaking and these costs can be used in product pricing, cost-based
pricing may be the best place to start. However, increased understanding of your competition and your
customer is what marketing is all about. Efforts to improve knowledge about your customer base and
the firms that are competing in your market will have long term payoffs.

Gurumurthy Kalyanaram & Ragu Gurumurthy (2008)3: In some industries and some geographic areas,
pioneers have lost market shares advantage relatively quickly. This can happen for any of several
reasons:

1, An entrenched pioneer may not be offering a superior level of customer service.

2, A new technology may have changed the cost equation, so that a new entrant can offer similar or
better services at lower costs.

3, The new entrant may have developed a new way to access the market with an innovative distribution
strategy.

4, The latecomer may simply be pricing aggressively targeting selected segments by taking advantage of
the incumbents tendency to average pricing across all segments.

Defense strategies for pioneers are:

1, To increase to barriers to entry for late entrants.

2, Innovate faster than the latecomers.

3, Build a market responsive and flexible organization.

Michael J. Baker (Ed.) (1999)4: extrapolations of sales are inexpensive and often adequate for the
decision that needs to be made. In situations where large changes are expected or where one would like
to examine alternate strategies, causal approaches are recommended.
1, Domain knowledge should be used.

2, Method should be selected on the basis of empirically-tested theories not statistically based theories.

3, When making forecasts in highly uncertain situations, be conservative. For example the trend should
be dampened over the forecast horizon.

4, Complex models have not been proven to be more accurate than relatively simple models. Given their
added costs and the reduced understanding among users, highly complex procedures cannot be justified
at the present time.

Karen Butner & Mark Wilterding (2006)5: Consumer products manufacturers are under increased
pressure to grow revenues and improving operating efficiency. Challenges in meeting growth targets
include changes in consumers, demographics, increased competition in mature market, increased
spending on services, the rise of private labels and the low success rate of new brands.

Problem Statement:

Hypothesis:

Hypothesis in this case would be:

H0: Sales can be increased by making a product more in line with market requirements and penetrating
it.

H1: If the initial hypothesis is rejected then we will introduce innovation in the product and thus sales
can be increased.

Main Objective:

The main objective in this regard will be to introduce market penetration and increase sale thus
increasing shareholders wealth.

Sub Objective:

The sub objective would be to use market penetration and use it’s additional revenues for societal
purposes.
 Research Design

Primary data:

The source of primary data in this regard will be to use questionnaires and distribute them among all the
personnel spread among the distribution channels. This way we can avert any possible biasness and the
results would be able to be compiled more easily.

Secondary Data:

The secondary data in this regard would be use market penetration reports prepared by companies
before us and the only care that should be done in this regard is to choose strategies that have a high
success rate.

Population

Sample Unit:

A sample unit would be a single person who would answer a questionnaire and thus one person would
become one sample unit.

Sampling size:

An appropriate size in this regard would be to use around 50 to 60 people in this regard.

Sampling strategy:

The sampling strategy that would be used would be stratified sampling in this regard. First appropriate
stratas would be formed in this regard and then random sampling would be done.

Data Analysis

Statistical tools and softwares:

The tools that would be used in this regard would be computerized software such as SPSS. The
advantage of using this would be that analysis afterwards would be made much easier afterwards. SPSS
would also provide us with computerized tables and figures and would give the viewing audience a
clearer image.
 Conclusion

Market penetration is a very effective tool and if used properly, it promises great benefits. Companies
need to realize the potential of this thing and implement it to their usage. Also, in the middle of a
recession, this can prove to be a very successful strategy.

References:

1, http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex1133

2, http://www.cals.uidaho.edu/edComm/pdf/CIS/CIS0942.pdf

3,http://scholar.google.com.pk/scholar_url?hl=en&q=http://iris.nyit.edu/som/gkbak/gkresearch_0905_
files/Market_%2520Entry%2520Strategies_GKRagu_Fall1998.doc&sa=X&scisig=AAGBfm0eYqqYpuBMGB
i1eW1SwbLBfrFJnQ&oi=scholarr

4, http://papers.ssrn.com/sol3/AbstractNotFound.cfm

5, http://www-935.ibm.com/services/ch/bcs/pdf/scm-perfect-prod-launch.pdf