Strategies for Retail Market Penetration
Market penetration strategies include
the following: -
1. Price Penetration
It is setting the price of the product
or service lesser than that of the competitor’s product or service. Due to
decreased cost, volume may increase which can help to maintain a decent level
of profit.
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. Aggressive Promotion
Increasing product or service promotion
on Social Media, Hoardings, Television, Print media, Radio channels, e-mails,
pulls the customers and drives them to view and avail the product or service.
By offering discounts, various buying schemes along with the added benefits can
be useful in high market penetration.
3. High Product
Distribution
By distributing the product or service
up to the level of saturation helps penetration of market in a better way. For
example, Coca Cola has a very high distribution and is available everywhere
from small shops to hypermarkets, Free Home Delivery.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. Growth Strategies
If a retail organization conducts SWOT
Analysis (Strength, Weakness, Opportunity, Threat) before considering
growth strategies, it is helpful for analysing the organization’s current
strategy and planning the growth strategy.
Ansoff’s Matrix
An American planning expert named Igor
Ansoff developed a strategic planning tool that presents four alternative
growth strategies. On one dimension there are products and on the other is
markets.
This matrix provides strategies for
market growth. Here is the sequence of these strategies −
a) Market Penetration − Company focuses on selling the
existing products or services in the existing market for higher market share. E.g.,
Telecom Company.
b) Market Development − Company focuses on selling
existing products or services to new markets or market segments. E.g., Nike
& Adidas entering in Chines Market.
c) Product Development − Company works on innovations in
existing products or developing new products for the existing market. E.g.,
Automobile company creating Electric Car.
d) Diversification − Company works on developing new
products or services for new markets. E.g., Leather shoes producer start
manufacturing mobile phone.
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