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Market penetration rate, or penetration rate, is the percentage of your target customers that make at least one purchase over a period of time. The following are examples of how market penetration rate is used to measure marketing results.
DistributionA firm with a high market penetration rate may decide to expand its distribution in order to continue to grow. For example, if an organic juice brand has reached 80% of customers in France it may decide to expand into Germany.Brand ValueA high penetration rate can be viewed as a problem for brands. This is particularly true for luxury brands that tend to go through a cycle whereby brand value declines with market saturation as a brand loses its status.
PricingA high penetration rate may be an opportunity to raise prices. A low penetration rate potentially indicates your pricing model is broken.Advertising & PromotionA low penetration rate is often used as a business case for more advertising and promotion. If a brand of toothpaste has only reached 0.05% of its target market, it may require advertising spending.
SalesPenetration rate is important to sales strategy. For example, a sales team that has reached a high penetration rate may need to focus on cross selling.Target MarketA high penetration rate may indicate that a target market is too small and needs to be expanded with new products, brands or distribution channels. A low penetration rate may indicate that a target market is too broad and a firm may be more successful targeting high yield customers first.
Marketing Metrics
This is the complete list of articles we have written about marketing metrics.
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