What Is a Penetration Market Strategy?

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Marketing strategies allow companies to develop several tactics for selling a typology of product inside a particular market. There are many possible strategies, all with their pros and cons; but depending on the company’s goal, one or another will be implemented. E-commerce stores could benefit from a penetration pricing strategy.

Marketing strategies take into consideration all the factors that surround a business, might it be internal aspects of the same company or external factors derived from the market’s situation. These methodologies enable companies to understand what the current situation is so they can make better assessments and decisions.

However, depending on the company’s needs, they set specific goals that they will achieve through one strategy or another. The time to implement these strategies can take from weeks to years, depending on what the company needs.

Thus, a marketing strategy could be defined as a business’ commercial development in a product, branding and customer level. It spans many different aspects, and it is essential that it focuses on realistic goals, so the company doesn’t find itself in the middle of undesirable surprises.

Penetration pricing strategy Goals

One of the strategies commonly applied by e-commerce business is the penetration pricing strategy. This methodology has two main goals:

  • Measure the potential consumption of a specific product in the market.
  • Swiftly enter the market to get a good market share and stand out at the eyes of consumers.

The primary goals for penetration pricing strategies measure the potential market share that a particular product (or even a brand) has inside a market. And also keep gaining market share among current consumers and increasing the number of new clients.

Truth be told, it is easier for vertical-leader companies to apply this kind of marketing strategies, as it is simpler for them to reach a wider audience due to their well-established products and the brand reputation they already have.

Benefits of applying a penetration pricing strategy

Market development

If your goal is to get more consumers (that is, increasing your market share), then you will have to develop campaigns that promote your products or brand inside the vertical. It is the case of companies that start operating in other countries and need to be known. It will be almost mandatory to make proper market analysis to optimize these campaigns.

Product evolution

Improving a product or including new features to it, is an excellent way to reach new consumers and increase sales. However, it is important to make a previous market study to watch whether this may end up in positive results.

Price adjustment

You can readapt the prices of your products, but do it carefully! A pricing increase or a drastic drop can have negative consequences for your company. That is why getting to know the market deeply you are working in will be crucial to make the most efficient pricing adjustments. For example, thoughtlessly lowering prices may get you a higher number of sales, but it can also damage your business’ image.

Cost optimization

When doing a penetration pricing strategy, and after having made the market analysis, you can better identify what are the needs of your market, more specifically of your vertical. This will be a useful clue to optimize your purchase conditions with distributors and improve your pricing strategy.

If you understand how your vertical behaves, you can better adapt the volume of stock you need and, in consequence, get a more competitive acquisition costs. At the same time, it will enable you to adjust competitive prices that maximize your sales opportunities. Nonetheless, it is vital to consider pricing strategies of your competition in order to stand out inside your vertical.

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