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Market penetration refers to the process of gaining market share by introducing your product to customers. To determine the type of customers you should be targeting it is important that you analyze your market in terms of the potential for market penetration.
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Market Penetration, Market-Penetration
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Market penetration refers to the process of gaining market share by introducing your product to customers. When you are planning your business strategy it is important to consider market penetration issues in terms of your revenue goals. If you need to generate a certain level of revenue, then a market penetration analysis will help you determine the type and number of customers you need to achieve your target.
Market Penetration Analysis
First you need to determine your revenue goal for the next twelve months. Then you need to figure out how much of that revenue will be generated per client.
Let’s look at an example:
Say you wanted to do $120k in revenue for your company within the next 12 months. In terms of market penetration you have to determine whether that is going to be earned from six clients at $20k each, 12 clients at $10k each, or 20 clients at $6k each?
Market penetration analysis forces you to consider your average client size. This will help you determine your sweet spot customer. The bigger the client the more services you can provide and the fewer clients you need overall and vice versa. But this is only the first step.
To make market penetration decisions you also need to analyze the number and types of businesses in your area. Are there enough businesses who can afford $20k of service per year? It’s fine to have a market penetration strategy that targets large businesses but this target market must be realistic. By fitting your market penetration strategy with the types of businesses in your area you will be able to achieve your revenue goals.
The Bottom Line on Market Penetration
Market penetration is a strategy that looks at the type and number of target customers for you business. It is a strategy that starts with your total revenue goal. Market penetration is important to your overall business success and you need to make sure that you sweet spot clients will actually be able to generate the amount of revenue your business needs.
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