6 Market penetration examples for successful expansion
Written by Rafa Pulido ·
There are many market penetration examples that have been tried and tested for retail expansion strategies. And the recipe for success is always different. Market penetration can be understood as a strategy to enter into a new market. It’s also used as a metric to measure the percentage of market share a service or product is able to capture. Professionals from the retail space should always consider applying both definitions to their expansion plans for the best results. A market penetration strategy can be broken down into tactics that must be aligned with favourable market conditions. The market conditions—or indicators—should function as “proofs of concept” which will either support or refute the implementation of a certain tactic.
So, what are the different types of market penetration approaches being carried out by retail companies and which indicators can be used to opt for the best one?
Market penetration examples and their strategic indicators
1. Penetration pricing
When expanding a business into a new market, many retailers try to boost initial sales by setting prices lower than those of competitors. This pricing strategy works well in markets where consumers are price sensitive and retailers can generate high margins by selling large volumes of products. Most retailers will revert back to a normal pricing strategy once loyalty is established.
Location Intelligence indicator: When adjusting prices, retail professionals should always consider the average income of the people in a given area. If the purchasing power of a specific population is extremely high, there is a possibility that a product could be perceived as “less valuable” when an initial low-cost pricing strategy is used as the people there are not considered deal seekers.
2. Product launches
Launching a new product into the market is another market penetration example that can be used for growing a business. Companies tend to generate a lot of hype amongst their target markets when it comes to releasing new products. This can be easily capitalised on by using the heightened awareness from consumers about a particular product to establish a strong brand presence.
Location Intelligence indicator: Paying attention to consumer spending habits and knowing which types of products they purchase is an important part of any product launch. If your new product is in-line with demand and people’s behaviour, the product launch will be even more powerful as it meets consumer expectations.
3. Define new target segments
Discovering new audiences within a larger population is an equally effective example of market penetration. Many times, the saturation of a product or brand amongst a specific demographic can hinder growth. Finding new niches to promote products is an excellent way to tap into new markets and evolve your customer base.
Location Intelligence indicator: Profiling the people in your target market correctly can open the possibility of discovering a new segment. Maybe you were unaware that one of your products was gaining traction with a particular demographic. Geolocation data can help you detect those trends so you can refocus your marketing efforts.
4. Expand into different territories
This market penetration tactic is one of the most common ways companies try to grow their businesses. Once a market becomes saturated, most retailers will start to look elsewhere to set up shop. Moving to a new territory is one of the most straightforward methods to build a retail empire, but the market conditions must be positive for it to work.
Location Intelligence indicator: Sustainable expansions into different territories require shrewd business acumen. Big data insights that reveal the unique market complexities of a new territory can help ensure that you’re expanding your business to the right location where there are high concentrations of your target market.
5. Start a chain or franchise
If your business is rising in popularity with customers, it could be a good moment to open a new location. Retailers can do this in two ways: they can start a chain and run the business themselves or decide to franchise and allow a franchisee to manage their brand in another location.
Location Intelligence indicator: During the site selection process for the next store in your chain or franchise, it’s essential for retailers to understand the true level of influence each one of their catchment areas has. This is the only way to prevent the cannibalisation of sales between two locations and ensure maximum market share for each.
6. Develop strategic alliances
Some companies look for other like-minded companies where there are untapped synergies as a means to enter new markets. Retail brands can develop those partnerships through co-branding agreements or even mergers. It’s important to keep in mind that when a company undergoes a merger, the original brand does not always remain in existence.
Location Intelligence indicator: Finding synergies with similar companies to merge or establish partnership agreements with is challenging. Retailers who use geolocated data to pinpoint positive purchasing trends of certain products can later use this information to find companies responsible for selling them in the area and partner with them.
Location Intelligence, the smart way to penetrate new markets
Each example of market penetration covered in this article has been closely linked to an indicator that illustrates the conditions of a market. When retailers are capable of clueing in to the unique contexts that make of up a potential new market, they can choose the most adequate strategy to support growth. Nevertheless—as there are so many available data sources on the market—it can be challenging to find the best-suited indicators…
Screenshot of Geoblink’s Location Intelligence platform that compiles various indicators together to evaluate market conditions
This is where Location Intelligence technology becomes a highly strategic asset to astute professionals who have untapped its benefits. By compiling many different data sources and enriching them with artificial intelligence techniques, retailers have all of the contextual market indicators they need to choose the right tactic within one simple tool. With Location Intelligence, applying smart data to an expansion strategy is a reality for forward-thinking retailers who want to avoid costly missteps and maximise success. The time has come to move away from “gut feeling” and “previous experience” to grow a business and maintain your competitive advantage with competitive technology.
Would you like to see which market penetration examples are the best tactics to expand your business?