Brand penetration is a measurement of a brand’s popularity amongst the general population and is also known as the market penetration rate. It measures how many people buy a particular brand over a determined or exact period. This figure is put into a formula which is then divided by the scope of the particular market’s population, or the number of people available in that respective niche market.
The calculation shows not only the number of people in a particular niche but also in a geographical location and the demographics of those people (age, gender, race, income level, etc). It’s a way we find out more about a particular market segment.
Brand penetration is one of the measures of a company or industry’s ability to get consumers to use their products. It requires the forceful application of pricing, promotion, and distribution to grow market share.
The brand penetration formula
Brand penetration is a quantitative measure of the sales of a product or service, compared to the total sales. It’s expressed in the form of a percentage. We can get this percentage by doing the following: We divide the number of customers who have purchased the product by the total general population. It is possible to calculate this if you know the total market size and how much of a product is being sold relative to it.
This calculation helps us develop strategies that aim to increase the total share of these products or services. A good penetration rate for a consumer product ranges from 2% to 6% and for business products, anywhere from 10% to 40%.
An example of a calculation is as follows:
Brand A: 34,000/1,000,000 = 34
Brand B: 210,000/1,000,000 = 21
If we calculate the brand penetration of brand A and brand B in a market with one million people it shows the number of people in a specific geographical location, niche, demographic who’ll choose to adopt a specific brand.
How to increase brand penetration
To understand this, we need to look at market penetration. It is both a measurement and an activity. Regarding the measurement, this refers to how much of a product is being sold in comparison to the total of the estimated market for that product, which is expressed as a percentage:
Market penetration rate = (number of customers/target market size) x 100
So brand penetration is the calculation of the number of customers who buy a specific brand over a specific time period, divided by the scope of the market’s population. Market penetration looks more closely at the measurement of how much of a product is being sold relative to the estimated (or theoretical) market for that product.
Product Push Strategy
Product Push Strategy is one in which a company tries to introduce its goods to customers – to "push" their items to the goods. The aim of a push marketing approach is to use different active marketing strategies to get their goods in front of customers. To increase brand or market penetration you should devise a product push strategy:
The Sales Team
Select quality salespeople who establish good, long-term relationships with your customers and who understand the sales process.
Use them to full advantage by keeping them involved and by giving them the following information: They should be aware of the competition and understand it, consider product positioning, as well as the strategies they are using.
Train your sales team by giving product demonstrations when your new product is released. They need to fully understand what the features and benefits of the product are, helping them to sell solutions to any problems in a confident way.
Encourage your sales team to take responsibility for their own learning and ensure that they are immersing themselves in the sales process, analyzing it, and understanding all aspects of it. For example, product pitches, what is working and what isn’t. The sales strategy needs to be focused on communication of the value of the new product to the customer.
Encourage sharing of information and communication between salespeople by arranging regular meetings and opportunities to discuss successes and failures they have experienced with the product.
Ensure that the sales team re-engages with existing customers, upselling to them, and driving new leads amongst them.
Product Positioning
Work out a product positioning strategy with your sales team. It should have three elements to it:
i) Establish how your new product stands out from your competitors.
ii) Address the buying needs of the customers.
iii) Inform your salespeople about the main positive features of the product.
The concept of penetration pricing can be used, where lower prices than your competitors are set. This works well in markets where consumers are sensitive to price and where large volumes of products can be sold by retailers. Once loyalty from the customer is gained retailers can go back to a normal pricing strategy. However, it should be noted that when one brand lowers the price of its products, competitors may quickly do the same, which results in a lower industry price for that product and you should take care that you don’t make only marginal profits or even losses.
Use bundling of products to gain traction, where a few products are grouped together and sold as one unit. An example of this is McDonald’s Happy Meals.
Sampling can be used as a strategy to increase penetration. You can distribute free samples through an activation agency.
Market Indicators
Use Location Intelligence Indicator technology which uses artificial intelligence sources to compile data on contextual market indicators. This competitive technology does away with guesswork, “gut feelings” and “previous experience” to avoid costly mistakes and ensure success.
An example of using this technology is to use the indicator of the average income of customers in a particular area. If the purchasing power is high and they are not, on the whole, deal-seekers then the strategy of penetration pricing won’t work when the initial price is set low.
Marketing Plan
Work on your marketing plan and create interest on social media channels. At the same time use email campaigns and more traditional ways of advertising and promotions at trade fairs as well as product launches. Apart from brand recall, the message of your marketing materials should show the following:
i) One primary message.
ii) Differences between your products and those of competitors.
iii) Reliable solutions which offer viable long-term benefits. Also, advertising a brand over a long time generates awareness of it, as well as preference and trust.
Promotion to Channels
Find new niches for your product within a larger population and expand into different areas if the market conditions are positive. For example, if there’s a high concentration of your target market there.
Combat competitors by urging loyal customers of their brands to experience your products once. If the quality and price are comparable or preferable to them then they can be added as new customers.
Start a chain or franchise, allowing a franchisee to manage and expand the brand in
another area.
Expanding to Distribution
Have a strong distribution network, which ensures that the product is available for the customer at the right time and place so that their demands are met.
Develop alliances with other companies which are mutually beneficial to enter new markets. This is not always straightforward or trouble-free but can be done by co-branding agreements or mergers.
Having a strong research department will ensure an innovative product with a strong competitive advantage. A product that is new and improved will always attract customers and they will often be those who follow trends and are keen to buy and try out the new product.
What great brands do
The strategy of brand penetration is aligned to the constantly changing and challenging modern world. It can often be compared favorably to other more traditional strategies, like frequency, and is more effective long term. Traditional marketing strategies focus on getting a larger customer base vs growing how much of their product their customers buy.
Brand Penetration at Any Age
Brand penetration works as a strategy for young and mature businesses and it’s an important part of any brand life cycle. For new companies, it is vital to implement it. If they fail to penetrate the market successfully the product will not stay on the market and it will be difficult for the company to survive. For companies that are already established, it helps to increase the customer base significantly and reduces competition by allowing a competitive advantage and ensuring future growth.
Brand penetration can be seen as more profitable than brand frequency as when you target penetration, you automatically impact frequency. The reverse, however, does not apply. Growth comes from new consumers and by focusing on penetration, brand non-user barriers can be removed, which then increases the frequency of brand users.
It has long been believed that a loyal customer with good frequency had a higher value than penetration, but marketers are realizing that there is more value in increasing your customer base than retaining existing consumers. Brand penetration also results in more customer referrals.
Consumer Behaviour
It is important to observe shopper behavior and understand consumer decisions and behaviors where they are affected by the sheer volume of brands available on the market. They are also exposed to a huge volume of adverts. Brand penetration supports the commercial aim of reaching more consumers, more often.
Another fact worth considering is that most consumers buy your brand only once. So brand managers should focus on the larger shopper base (the infrequent shoppers) instead of upselling to the more regular customers.
It has also been found that for most brands these shoppers don’t buy the brand at all, and these are the consumers which are important for future growth. So when we take into account those that don’t buy into a brand it can be seen that splitting activity into “penetration driving” and “frequency driving” is not useful. The same activity will result in non-buyers buying the brand and infrequent buyers buying more often.
It has been said that your buyers don’t belong to your organization and that they will make different brand choices regularly. It may be worth asking if brand loyalty exists at all, or if it’s just as a result of brand size that shoppers buy a specific brand. Trying to get greater loyalty to a brand without increasing the number of buyers doesn’t make sense if we consider that the brands with the most buyers have the highest levels of loyalty.
The buyer base of an organization is in constant flux. If a buyer doesn’t repeat the brand purchase it could be a conscious rejection, but it’s more likely to be a result of circumstantial factors like the specific brand was not available in a store on a given day, or they could get it at a better price from a competitor. One can see that customer recruitment isn’t only necessary for brand growth, but it’s important to keep brand penetration at high levels.
Target Market and Competitor Activity
It is vital to understand who to target, especially those shoppers not already buying the brand, as finding and recruiting them is important for growth. Brand managers need to ask the question: ”How many shoppers do I need to attract, and how much money do they need to spend?”
One of the main advantages of the brand penetration strategy is to combat your competitors, which may lose part of their market share when you lower the prices of a brand initially, for example. It also allows a company to find out more about the pros and cons of a competitor’s products.
It can be helpful to a company in the overall assessment of its performance. It allows them to quickly improve their products and adjust prices if necessary.
It also allows for the fast growth of an organization. Low prices which guarantee a larger customer base allows you to increase the volume of products ordered from a supplier, allowing higher profits from lower prices.
Conclusion
Building a brand, increasing brand exposure, maintaining it (as well as customer loyalty and profit), is challenging. But providing good customer experience is central to any brand that is a success. Using the strategy of brand penetration you can get recognition, recall, loyal customers, and overall brand affinity with your intended audience.