How to write a market penetration strategy (5 simple steps)

If you want to know how to write a market penetration strategy, you have come to the right place.

In this article we will explain exactly how to write a strategy to gain market share, and provide a simple example so you can do the same.

You can write a market penetration strategy with these five steps: 

1. Identify your baseline
2. Identify the opportunity
3. Develop your unique selling proposition (USP)
4. Build your marketing mix
5. Review your Key Performance Indicators (KPIs)

Let’s now review how a company can build their market penetration strategy, review some examples and lay out a simple plan so that you can write your own strategy.

How to Write a Market Penetration Strategy (example and plan)

Any business can increase its market share by increasing:

• Customer awareness
• Customer loyalty
• Customer transactions 
• Gaining new customers

There are lots of ways to build a strategy to make this happen.

And in fact, buying a direct competitor is probably the fastest way to increase your market share and gain a rapid growth in sales revenue and new customers. 

For example, if your market share is 10% and your competition owns 30% of the market, you could quickly own 40% of the market.

If that is your main priority.

But many companies want a market penetration strategy for stable, scalable growth.

And that is exactly what we will outline here.

We are going to review a simple, real-world plan that our team has done on many occasions which lead to an increase in sales revenue and more happy customers.

Before we start to develop our plan, it would be helpful for you to review these informational articles:

• Recency, frequency, monetary (RFM) | Marketing analysis
• How Do I Increase Sales? | 3 Strategies (+Free template)
• Market penetration vs market expansion (the difference)
• Targeted Direct Mail Marketing
• What is Your Email Marketing Strategy?

Ok, let’s now start to construct our market penetration strategy.

Step #1 of your market penetration strategic plan: Identify your baseline

Let’s say you work for an auto shop who does regular auto maintenance (oil change, brakes, tires, etc) and you have 10,000 potential customers in your target market as defined as:

• 10,000 home owners with a 
• household income of $60,000 a year or more within a 
• 3-mile radius of your shop

A market penetration strategy consists of gaining as many customers as possible within this given target market. 

For example, since your target market is defined as 10,000 home owners with a household income of $60,000 a year or more within a 3-mile radius of your shop, you first need to identify how many of this target market is in your customer database.

If, for example, you have 1,000 of these as paying customers in your database, this means:

You have a 10% market share

But now let’s assume your market penetration strategy objective is to gain a larger percentage of this target market, thereby increasing your market share.

This is where the strategy needs to be developed. And this is what we will do in Step #2.  

Step #2 of your market penetration strategic plan: Identify the opportunity

This is an easy step. But it’s super critical to get hyper clear on. 

This step is to clearly define exactly who is left in your target market. 

In this case, since your target market is clearly defined at 10,000 and you know you have 10% in your database, you know that you need to gain a portion of the remaining 90% as customers.

In this case, the math is simple:

10,000 (in your target market) - 1,000 (you own a 10% market share) = 9,000 (90% in your penetration strategy)

Onward to step #3.

Step #3 of your market penetration strategic plan: Develop your unique selling proposition (USP) to this target market

This step is where the magic happens.

We aren’t going to elaborate too much on this step as we already covered how to develop your unique selling proposition (USP). Additionally, one very important strategy needed to give yourself a competitive advantage is to use the Free in your marketing.

For two very helpful resources on these topics, go here:

• How Do You Write a Unique Selling Proposition (USP)?
• How is “Free” used in marketing? (5 clever strategies)

Step #4 of your market penetration strategic plan: Build your marketing mix

While it is entirely possible that you can simply do more of what you did to acquire the first 1,000 customers in this target market, it is also possible to make some adjustments to your plan in order to acquire more customers at a faster rate, i.e., improving your conversion rates.

For an excellent tutorial on how to increase your conversation rates, go here:

How to increase website conversion rates (examples and guide)

For one, an easy strategy is to simply increase your marketing budget. 

If you know that the cost to acquire a customer is $100 because your marketing spend report says you spent $100,000 to gain your first 1,000 customers, then the math is clear.

If you would like to gain another 1,000 customers in this target market, you could allocate $100,000 and repeat the process, with the assumption that your customer acquisition cost is still $100.

But, if you want to change your marketing mix by changing the media or the message, then you will essentially be starting over, and beginning to re-test your cost per acquisition metric. 

In this case, hopefully you can acquire a customer for less than $100 each.

As you get started to develop this foundation, here are two essential articles that will help you master these techniques:

• What is the first rule of marketing? (Solved!)
• What is the marketing mix and why is it important? | The 4 P’s of marketing

Once you are done building this foundation, you will have a clear plan on your:

1. Message (i.e., the use of “free”, your USP, your offer, etc)
2. Media (i.e., Internet, PPC, direct mail, radio, TV, etc)
3. Market (i.e., your target market is clearly defined in this example)

Step #5 of your market penetration strategic plan: Review your Key Performance Indicators (KPIs)

Now for the fun part.

This is where you review your stats. And it can be part of your daily, weekly, monthly, quarterly and annual process.

Now, fast forward 12 months. If, after 1 year of executing your penetration strategy, you find that you now have 2,000 customers in your database, you have a 20% market share as a result of your market penetration strategy.

In this example, you doubled your penetration market share as a result of your strategy.

For a very helpful article on establishing your metrics, go here:

5 Important Key Performance Indicators (KPIs) in Marketing

To maximize your market penetration strategy, it's important to implement a marketing plan that includes strategies for increasing market share, retaining customers, and gaining new ones. 

References

A Tactical Framework for Market Penetration with a Multidimensional Organization: https://www.researchgate.net/publication/329602174_A_Tactical_Framework_for_Market_Penetration_with_a_Multidimensional_Organization

The Influence of Market Penetration Strategies on Market Share in the Hospitality Industry in Arusha, Tanzania: https://ijsrm.in/index.php/ijsrm/article/view/4103