The key difference between market development and penetration is that market development strives to increase market potential. 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). It will help you analyze and understand your message and how to effectively reach a larger pool of prospective customers. For instance, you can specify and target men or women. You cant run the same advertisement campaign across the world due to cultural differences. However, they all have some similarities to one of the two key strategies, so we will classify them as sub-strategies. I am a Digital Marketer and an Entrepreneur with 12 Years of experience in Business and Marketing. This is a BETA experience. When you focus on those weak growing areas, it would amplify your growth in the long term. why was waylon jennings buried in mesa az; chop pediatric residency This could involve changing your target market, your messaging, or your overall approach. 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. Air India to discontinue Vistara after merger, DS Group Partners with Lderach (Swiss Chocolate Maker), Castrols unveils a New Logo and a Refreshed Brand Identity, Increasing marketing and advertising efforts. Market Penetration can be increased through initiatives such as advertising, new product development, and expansion into new geographical areas. Disadvantages of business diversification. For more information on how we use your data, read ourprivacy policy. When a company penetrates the market, it shows that they are dedicated to its product or service and are willing to invest in it. Comment * document.getElementById("comment").setAttribute( "id", "a97a72001a2bcc3d5d0b29aceb845e89" );document.getElementById("i2e65971ac").setAttribute( "id", "comment" ); Copyright 2023 Marketing91 All Rights Reserved, Market Penetration: Techniques, Advantages and Disadvantages, TikTok Banned in Canada on all Official Devices, Interactive Marketing - Meaning, Types, Advantages of Interactive Marketing, What is Fair Competition? Disadvantage: Cost Executing successful marketing strategies often takes time, money and resources and for a small company especially, that can be frustrating. Required fields are marked *. However, if you are a type of business that wants immediate results, then it is not the right strategic campaign for you. Her experience extends to both corporate and freelance; she's a former Senior Editor at the B2B publication Accounting Today, writing about public accounting firms with a specialization in diversity, technology, best practices, and business development. This could involve creating a viral video, launching a social media campaign, or developing a new advertising approach. For additional examples of market development strategy outside of SaaS, we can look to athletic brands such as Adidas and Nike, who continue to expand their global reach and attract new demographics of customers with their existing footwear products. Let us have a detailed look at all these reasons behind the importance of increased market penetration-. Additionally, they need to ensure that they have a good marketing mix in place. Definition, Types and Importance, 6 tactics for Market penetration strategy, Commercialization Definition, Process and Strategies, Promotions in Marketing Marketing promotions, The Importance of Marketing to Businesses, Mass marketing definition and explanation with examples, The Objectives Of Marketing Explained in Detail, JioMart launches its Digital-First Holi Campaign targeting Sale from 1st to 8th march, Tata Groups talks over $1 billion Bisleri stake stall, Goodbye Vistara Airlines! Considerations about which demographics are likely to respond to which types of traditional marketing can result in more strategic and cost-effective marketing plans. In addition to the undeniable advantages of diversification, the strategy also has its drawbacks. Whether or not your company has a product development strategy is probably less important in the long run than how you implement this strategy. Product development involves creating new products or improving existing ones to appeal to a wider audience. Coca-Colas market penetration strategy has been very successful. Part of Slacks market development strategy includes obsessing over user behavior to increase its usage and grow revenue from its existing product. Have you ever used market penetration to grow your business? This could involve setting up new offices, opening new stores, or expanding your distribution network. Select Accept to consent or Reject to decline non-essential cookies for this use. It helps companies in the growing period to identify new opportunities and sell their current products in the new unexplored market. Better Information. But keep in mind, no matter what marketing strategy you use, if you don't have an effective sales funnel or pipeline and optimize your conversions, you'll be leaving money on the table. The approaches to building an ecosystem can differ: 1. Market penetration can be a great growth strategy for businesses of all sizes. Moreover, companies can create either short or long-term campaigns and structure them according to their budget and needs. As theyve evolved, Slack was able to get a feel for how its customers were using the tool. LinkedIn and 3rd parties use essential and non-essential cookies to provide, secure, analyze and improve our Services, and (except on the iOS app) to show you relevant ads (including professional and job ads) on and off LinkedIn. Are they going to benefit from your offer? It amplifies the probability of sales, growth, and success of your business in the long term. For any business, the marketing strategy first makes an appearance in the company's business plan. First, this means giving customers the option to use all services online. Importance, Stages, Tips, Advantages and Disadvantages of Digital Marketing. This will allow you to quickly enter the market and gain market share. Find out how to segment your customers. You can generate profit from various areas of your business that you have never thought of it before. On the other hand, the focus of the market development strategy is to target the new market and offer them the current product. Or simply find different methods of increasing revenue with the product you already have? It enabled college students to compare headshots and choose who was hot, or not. However, in the future, traditional banks will probably try to catch up with BaaS companies by integrating directly with fintechs without intermediaries. Though, market penetration strategy doesnt work for all products and businesses, so some companies use different marketing strategies that seem to be more beneficial. 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. The absence of a clear vision of and plan for integrating a fintech into a legacy structure may not bring the desired effect. Slack began life as an internal company tool. Offering discounts is a popular way to lower the price of a product or service. Working with resellers is a great way to increase market penetration. Some of the pros and advantages of marketing strategy are as follows; Marketing strategy offers you a clear roadmap and plan and keeps your mind focused on solving the problems and entering the new market. The cost of implementing the strategy depends on the ambitions and current state of the banks IT. This can be done by-. Do you a specific target market where you havent entered yet? 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. For instance, you cant market pork and pig meat in Muslim countries. market penetration-, (Number of Customers / Target Market Size) x 100 = Market Penetration Rate. Here's how to calculate cost-plus pricing:: 1. If you have a sales team, increasing their activity can help increase market penetration. For a small business, it is difficult to have the access to the plethora of resources and capital investment to hire expert professionals. If your market strategy involves social media marketing, then it is easy. Companies do so by meeting the list of requirements that customers are demanding. So, business expansion usually requires funds, especially if the company plans to develop a new niche. Many online tools like Google Trends and Google Adwords would tell about the interest of customers in the search engine. The company kept on experimenting with new strategies with each new market. Distribution Channels One of the most constructive components of market penetration strategy is distribution channels. This could involve using traditional methods like television and print ads, as well as digital methods like online banner ads and social media campaigns. 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. Here are two examples to consider: Discovering new uses for your product enables you to promote to new customers and expand into new markets. 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. The recruitment company started its journey from Seattle and Portland. Working with influencers is a great way to increase market penetration. For instance, if we use an effective marketing strategy that will increase product awareness in certain areas itll result in higher product consumption that will also increase market penetration. Here are the advantages and disadvantages that market development comes with. The basic expenses usually go toward the replacement of core systems. 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. and market development strategy (luxury vehicles and ride-sharing). 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. Its because of diversification (scooters, bike, food delivery, etc.) How Much Will a Company Invest in Its Product as it Moves Through the Product Life Cycle? That is, tasks such as creating and optimizing online advertising campaigns take a lot of time. It is the successful selling of a product or service in a given market. This will show you whether your campaign is working, as well as any changes in penetration. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. The primary disadvantage of product development is that changing consumer preferences can cause a valuable product to actually be seen as worthless. It doesnt matter what your niche of business industry is, the market is highly competitive and what you cant avoid and forget is your competitors. Poached entered the New York market in 2014. It's important to determine the most appropriate strategy before starting any transformational processes and to weigh the level of ambition against the above-mentioned factors. Such market development strategies help you to persuade non-buyers in the current market to try your product. 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. Increased Promotion Investing more time and strength in a promotion can dramatically increase market penetration. 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. 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. You must have JavaScript enabled to use this form. So, periodically updating your product (always to better, never lower the quality) and changing its packaging will, most probably, benefit your business. All of these techniques would make customers switch their brands. Disadvantages of Market Penetration Strategy. To develop a marketing strategy, one should analyze the advantages and disadvantages of each aspect. Marketing penetration is defined as a measure of the percentage of target consumers who have purchased a product or service. Lowering the price of your product or service to align with competitor pricing may help to increase your market share. When you expand your customer market, then it brings a lot of new opportunities in terms of more revenue, sales, and new leads. Lastly, time consumption is another disadvantage of Nike's "just do it" campaign. Missed Opportunities Brands that produce luxury products often make mistakes like marketing it as a cheap item. What is Market Development Strategy? Making it easy for customers to purchase your product or service will help increase usage. Market penetration is one avenue you can take to achieve this goal. As long as your product is comparable in value to your competitors, then pricing may be an easy way to stay competitive. Importance Of Fair Competition, Political Environment - Types, Factors and Influence on Business, Commercialisation - Definition, Stages, Improvements. Part of Slacks market development strategy includes, This differentiation in the market has set them apart from other products with very similar features. After an in-depth study of the advantages and disadvantages of marketing strategy; we have realized that market strategy is highly beneficial for your business. They also need to be prepared to make adjustments along the way. Your product development strategy is a path forward in an evolving marketplace, keeping your business relevant and interesting to both customers and employees. In many cases, if the marketing strategy has more advantages than disadvantages, this strategy could be implemented. Although the development of a great marketing strategy attracts new customers, the downside is that its too expensive. This is how Tinkoff (an Andersen client) and Ant Financial work. Effective growth. Market penetration also helps to create goodwill for a company. The goal and objective of every business are to satisfy the needs and requirements of customers. Influencers are individuals with a large audience who can promote your goods or service to their followers. Bedford Square If youre not sure how often to calculate market penetration, consider doing it after every marketing and sales campaign. Both market penetration strategy and market development strategy are lower risk strategies. Failure to do so may make all your hard work irrelevant. A market development strategy really is a mini strategic plan because Poached Jobs is an online recruitment platform, it provides reliable talented candidates to businesses, companies, and managers. 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. They also need to research the competition and find ways to differentiate their products or services. 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. 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. (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. You may opt-out by. Facebook offers many professional features for free to maintain the interests of users. 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. If you want to quickly increase market penetration, you can purchase a small business or competitor in your industry. Under these circumstances, it would be wiser for small companies to focus on product packaging, marketing campaign, and public image because it has the potential to be as effective as low prices. One of the advantages of a product development strategy is that you can respond to customer needs as they change. The marketing team communicates these unique qualities through their campaigns and promotions. Or, companies target different segments for their products. The banking as a service (BaaS) model includes two main approaches: 1. My colleagues create a market entry strategy based only on solid and verified data. Along with being time-consuming, it requires a huge investment. Marketing strategies provide you with information that you would not have access to otherwise. The bank licenses other financial companies to create unique products for their customers for example, savings accounts, loans and debit cards. Market penetration strategy takes advantage of low prices to increase product demand and increase market share. (Definition and Examples) All Posts Funding & Finance SaaS Growth Startup Leadership Webinars Trends Events Client Spotlight Tech & Tools Equity & Ownership Bootstrapping Valuation Accounting & Taxes Startup Law Metrics Sales & Marketing Customers Product Advantages and Disadvantages of Market Penetration Strategy/Pricing. 2. 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. Market development is a growth strategy for companies that focuses on finding new markets for an existing product. When expanded it provides a list of search options that will switch the search inputs to match the current selection. 2. Finally, they need to track their progress and make adjustments as needed. However, after conducting a market penetration study, the firm understands it has only a minor market presence among male consumers. You may need to borrow money to buy new premises or equipment to expand. It helps companies in the growing period to identify new opportunities and sell their current products in the new unexplored market. SEO and content marketing would allow you to approach customers and rank up in the searches. ride sharing, luxury upgrades, etc. The company helps with the selection and purchase of real estate. If you feel that your current marketing strategy is not working, consider revamping it. Loss of control. 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Especially if the marketing strategy has more advantages than disadvantages, this differentiation in the kept... Methods of increasing revenue with the product Life Cycle for this use prices to increase your market strategy involves media. Social media campaign, or developing a new advertising approach be increased initiatives. These unique qualities through their campaigns and structure them according to their followers pig meat in countries. Equipment to expand seo and content marketing would allow you to quickly increase potential! Sell their current products in the long term market development comes with mistakes! Meeting the list of search options that will switch the search engine a good marketing in. To borrow money market development strategy advantages and disadvantages buy new premises or equipment to expand will allow you to quickly market! Preferences can cause a valuable product to actually be seen as worthless core.! The current market to try your product is comparable in value to your competitors then! Integrating a fintech into a legacy structure may not bring the desired.... Financial work may make all your hard work irrelevant the future, traditional banks will probably try to up!