Steps to measure market share by units sold
- Select your fiscal period
- Calculate your company’s total unit sales
- Calculate the total units sold for your industry
- Divide your company’s total units sold by your industry’s total units sold
Full Answer
How do you calculate the penetration rate of a product?
Penetration rate requires a well defined target market. In some cases, a total addressable market or serviceable available market is used. The other data item that is required is knowing how many unique customers you sold to in a period of time. The calculation of penetration rate is:penetration rate = (# customers / size of target market) x 100.
What is the penetration rate of the market?
The higher the rate, the more mature the market. If the penetration rate exceeds 80%, the market is considered “saturated”. When launching a brand new product or service, the calculation of the rate will help to assess the first years in which the product/service will be launched.
How can I improve my market penetration rate?
One way to keep this top of mind is to incorporate a review of your market penetration rate and any ongoing strategies into your monthly plan review. This will encourage you to look at financial forecasts, milestones, and current tactics all at once.
What is market penetration and market development?
Market penetration also relates to the number of potential customers that have purchased a specific company’s product instead of a competitor’s product. Market development is the strategy or action steps needed to increase market share or penetration.
How do you calculate market penetration rate?
The penetration rate is easy to calculate if you know your target market size. To calculate the penetration rate, divide the number of customers you have by the size of the target market and then multiply the result by 100.
How do you calculate penetration rate example?
Say, for example, a company sells watches and the total market consists of 5000 customers. Out of these 5000 customers, 500 of them buy its products. Now to calculate the penetration of this company in the market, we divide 500 by 5000, which gives us a market penetration rate of 10%.
What is a good market penetration rate?
between 2% and 6%An above average market penetration rate for consumer goods is estimated to be between 2% and 6%. A good penetration rate for business products is between 10% and 40%. Some brands calculate market penetration every quarter while others find it useful to do so after each ad and marketing campaign.
What is market and price penetration?
an approach to pricing in which a manufacturer sets a relatively low price for a product in the introductory stage of its life cycle with the intention of building market share.
What is a penetration percentage?
The penetration rate (also called penetration, brand penetration, or market penetration as appropriate), is the percentage of the relevant population that has purchased a given brand or category at least once in the time period under study.
What do you understand by market penetration?
Market penetration is one of the four growth strategies of the Product-Market Growth Matrix as defined by Ansoff. Market penetration occurs when a company penetrates a market in which current or similar products already exist. A way to achieve this is by gaining competitors' customers (part of their market share).
Is market penetration the same as market share?
Penetration rate shows the percentage of your target audience that you sell to. Market share, on the other hand, is the percentage you claim out of the total addressable market.
What is a low penetration rate?
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. Overview: Market Penetration Rate. Type. Marketing Metrics.
What is the market penetration rate based on potential customers?
Divide the number of actual customers by the total number of potential customers to find the rate of market penetration. For example, if the television has 190 million customers, divide 190 million by 200 million to get a rate of 0.95 customers per potential customer.
What Is Market Penetration?
Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service. Market penetration can also be used in developing strategies employed to increase the market share of a particular product or service.
How is market penetration measured?
Market penetration, as a measurement, can be recalculated following the various sales and marketing campaigns to determine their level of success— whether market share increased or decreased. Market penetration provides companies with enormous insight as to how their customers and the total market view their products. The figures can, in turn, be compared to specific competitors to determine how the company is faring in its sales efforts and how its products and services stack up to the competition.
Why are companies considered market leaders?
If a company has a high market penetration for their the products, they're considered a market leader in that industry. Market leaders have a marketing advantage because they can reach more potential customers due to their well-established products and brand. For example, a market leader and manufacturer of cereal will have far more shelf space and better positioning than competitor brands because their products are so popular.
Why is market penetration important?
Market penetration is not only used on a global and industry-wide scale to measure the scope and for products and services, but also is used by companies to assess their product's market share.
How to calculate market penetration?
To calculate market penetration, the current sales volume for the product or service is divided by the total sales volume of all similar products, including those sold by competitors. The result is multiplied by 100 to move the decimal and create a percentage.
What is market development?
Market development is often a strategy of specific details or action steps needed to increase the number of potential customers. Some strategies employ advertising, social media campaigns, and direct sales outreach efforts to prospects of untapped market segments.
Why do market leaders negotiate better terms with their suppliers?
Also, market leaders can negotiate better terms with their suppliers because of their significant sales volume. As a result, market leaders can often produce a product cheaper than their competitors, given the scale of their operation.
What are the economic advantages of market penetration?
As a result of lower prices than competitors, more consumers will buy the product which will result in higher profits. Alternative strategies will lead to attracting the lost customers and it will create an edge over the competitors.
What is the policy of entering the market at a low price and then establishing the product and eventually increasing the price?
Penetration Pricing Strategy – The policy of entering the market at a low price and then establishing the product and eventually increasing the price is called penetration pricing policy/ strategy.
What are the disadvantages of a product?
Some of the disadvantages are –. Unrealized Production Costs – Lowering the product price may lead to an increase in more number of consumers buying the product but it will also lead to production costs not being met and hence might result in losses.
Why is market penetration important?
Fast Growth – Market penetration is the best way to enlarge the consumer base. When better prices are offered to consumers, market share expands easily than before. As a consequence, growth occurs in the firm rapidly. Also, the sales and marketing strategies target the customer base ensuring a greater outreach.
How is market penetration calculated?
Market penetration is calculated as how much the product or service is being used by the customers in comparison to the total market for that product or service and is generally used as a means to create a position in the market especially in the primary stages of setting up of the business, which helps it to establish and develop a direction to expand and achieve growth in the market.
What is poor company image?
Poor Company Image – When a company produces more than one product, lowering prices of one product may lead to a bad image to the other products of the company and hence, the brand reputation may fall.
What is after sales service?
After-Sales Service – Providing after-sales service to the customers improves their satisfaction upon using the product while leads to them suggesting to consumers of competitor’s products which leads to personal promotion.
What Is Market Penetration?
- Knowing the answer to, "What is market penetration?" can help you understand why it is crucial for business success. Market penetration is a metric used to measure the number of people using a product or a service in relation to the total estimated market for the product or the service. This number is usually a percentage of the total estimated market. Market penetration of a product tel…
Why Is Market Penetration Important For Businesses?
- Market penetration helps businesses obtain a quantitative measure of how their target audience views their product and the popularity of their products. They can calculate their competitor's market share, compare products and understand which company is performing better. Market penetration helps companies identify if there is an opportunity to increase sales or expand their …
Calculating Market Penetration
- Companies use market penetration to analyse their industry and measure the market share of their products and services. It represents the total sales of a company in relation to the total market for the product. You can use the following formula to calculate market penetration: Market penetration = (number of customers for a product/ total market s...
How to Increase Market Penetration
- Different market penetration strategies may work for different types of businesses. Here are some ways in which companies can increase their market penetration:
What Is Market Penetration?
- Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service. Market penetration can also be used in developing strategies employed to increase the market share of a particular product or service.
Understanding Market Penetration
- Market penetration can be used to determine the size of the potential market. If the total market is large, new entrants to the industry might be encouraged that they can gain market shareor a percentage of the total number of potential customers in the industry. For example, if there are 300 million people in a country and 65 million of them own c...
Market Penetration For Companies
- Market penetration is not only used on a global and industry-wide scale to measure the scope and for products and services, but also is used by companies to assess their product's market share. As a metric, market penetration relates to the number of potential customers that have purchased a specific company’s product instead of a competitor’s product, or no product at all. Market pene…
Increasing Market Penetration
- While market penetration is a metric to determine the level of market share gained and the potential for new sales, market development focuses on the steps to achieving the gains in market share. Market development is often a strategy of specific details or action steps needed to increase the number of potential customers. Some strategies employ advertising, social media c…
Example of Market Penetration
- By the fourth quarter of 2017, Apple Inc. (AAPL) had amassed a market share of more than 50% of the smartphone market throughout the world.1 Apple has consistently introduced new versions or their iPhones with added enhancements and upgrades, including releasing its high-end iPhone X. As a result of its market penetration, Apple has a larger market share than all of it…