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Business Growth Strategy: Market Penetration & Market Development

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Identify the low-risk business growth strategies

Successful leaders understand that if their organization is to grow in the long term, they need to find new ways to increase profits and reach more customers.

Whether that’s developing better products or adopting more efficient processes, there are numerous ways for business growth. But how do you know which one will work best for your organization?  

The best practice tip is to use Ansoff Matrix – a strategic tool to quickly devise potential growth strategies and weigh up the potential risks. The matrix shows four business growth strategies that can be applied to identify opportunities to grow a business by developing new products and services or entering new markets.

Ansoff Matrix Business Growth Strategy

If your company wants to grow revenue with existing products or services, the lowest risk business growth strategies for expanding your customer base and increasing sales are:

  • Target new customers in an existing market (market penetration); or
  • Sell to similar customers in new markets (market development)

Market Development vs. Market Penetration

Market penetration focuses on the sales of existing products to existing markets, whereas market development is finding and developing new markets for existing products.

While market penetration is the lowest risk strategy, market development comes a close second because these two strategies avoid risk-taking product development, unlike the diversification and product development strategy.

Market penetration is the recommended strategy to start with, but it can have a reverse effect when the market is saturated. Sooner or later, you may need to take account of a higher risk, higher reward strategy to support continue steady growth. This is where market development fits in as a favourable strategy.

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How to implement Market Penetration strategies?

Market penetration is the least risky business growth strategy since it focuses on selling existing products in familiar markets. Most companies made it as a starting line and promote growth without the high-risk nature of tapping into new markets.

Even so, this strategy is highly competitive as you’ll be capturing the market share from your competitors, this is called a ‘red ocean strategy’.

There are several market penetration strategies, including:

1. Attract new buyers in your current market

This strategy is to convert occasional users to regular users by increasing brand loyalty.

Free trials or samples, promoted with advertising and experimenting with pricing strategies can be a successful way to capture the new consumers who are just ‘testing the water’. By allowing them to experience your product, you are getting yourself an opportunity to impress them.

2. Make your product more appealing than competitors’

The strategy, in this case, will be adjusting the 4 basic pillars of the marketing mix; it can be altering one or more of the elements such as product or promotion approaches.

Setting yourself apart from other products with very similar features — by offering better customer service, more competitive pricing, or more product promotion or expanding more distribution channels are among the competitive approaches in getting competitor’s customer to switch to your product and increasing your market share.

For instance, McDonald’s launched McCafe by serving premium roasted coffee for a reasonable price and placing itself as a secondary coffee provider to compete with Starbucks.

How to implement Market Development strategy?

If market development is the option for your business, the objective will be to develop new markets for the existing products. It is a higher risk but higher reward strategy to help your business continues to grow steadily. No fierce competition with existing competitors hence is called ‘blue ocean strategy’.

There are two broad market development strategies:

1. Enter into a new geographical market

This is a strategy where you can target the users in different markets with similar needs to your existing customers. It is mainly adopted by multinational companies to expand their businesses.

Expanding into a new market requires careful considerations and proper analysis to make sure you have a solid grasp of market growth rates, demand, barriers to entry and competitors, before making the initial investment.

Different geographical market has different preferences and needs. You’ll need to understand the market situation to consider creating buyer personas in the potential market. This is where market research call into play.

▶ Analyze your business’s potential to expand into new markets with IH Digital’s Market Readiness Research (MRR) Package. Learn more here.

2. Suggest new uses for your existing product

Exploit the alternative uses of your product enables you to hunt for new customers and expand into new markets.

Humans have exceptional creativity in improvising tools to get the job done, so how your product is being used may not make certain. Interviewing your customers can uncover the innovative ways that they are using your product, and you’ll be able to turn their inputs into fresh ideas to promote your product.

The small changes such as repackaging the product may open up a new market. For instance, a business selling tea leaves to the hotel or restaurant market may start selling to consumers by repacking the product in tea tins.

If a new customer segment can be acquired with an existing product, this amounts to market development.

Choose the suitable business growth strategy

In a nutshell, the difference between market penetration and market development relies on whether the existing products are offered in higher volumes in the existing market or a new market segment. Both strategies have their benefits and limitations.

Refer to the table below for the suitable strategy to adopt for expansion:

comparison table for business growth strategy

If you’ve been planning to expand your business in Asia but you don’t have accurate information about the new market to decide on your business strategy, we can help you to conduct market research to access and analyze the market potential.

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Interested to work with us in expanding your business? Contact us today to schedule a consultation with our marketing expert soon.