Based on a business building project, three essential questions arise: How to position yourself in the market, make yourself known and reach your goals? This becomes more correct and complicated when one decides to adopt an already busy field of competition. It is therefore important to think of a coherent trading strategy that will generate the levers to establish a permanent presence in the market. For this, there are various techniques in marketing to determine your competitive advantage. Today I invite you to discover and learn apply penetration strategy,
Entry Strategy: Definition
Penetration strategy is a marketing technique that allows an entityEnter a highly competitive market, or even saturate, depending on the situation at the price. In this, it opposes two other strategies which are: skimming policy and alignment of prices.
Developing a penetration marketing strategy aims to: gain market share By focusing on high-volume marketing of a product at a low cost. Unlike segmentation, this marketing plan requires a large investment in terms of communication, especially on social networks. It is really necessary to expose yourself to as many people as possible.
The success of a penetration policy is measured by the number of market shares achieved. it is called penetration rate, The goal is to place your product in as many sales locations as possible to reach as many goals as possible. This then makes it possible to benefit from economies of scale and achieve higher conversion rates.
the gain
The benefits of the penetration strategy can be divided into 3 main areas:
- gain market share : Establishing ourselves in a market where supply is critical requires the implementation of a detailed strategy. You have to seduce consumers to gain notoriety.
- convert or get new customers : By reducing prices, you will attract customers who feel they are paying too much for a similar product from a competitor. In addition, you will convert prospects who are cautious to begin with because they are concerned about the price factor.
- create a large customer file : By practicing an aggressive pricing policy, you will attract new customers in a big way. You can then build a vital database that will serve you throughout the life of your business.
inconvenient
However, the entry strategy has its limitations. The main disadvantages of practicing this technique are as follows:
- communication cost : Being new to the market, you have to deploy significant resources in the communication strategy to achieve your objectives. I always recommend during my coaching sessions to define the forecast of return on investment along with the budget. This makes it possible to avoid any unpleasant surprises because of the profitability of its marketing operations.
- cash requirements : If you choose a penetration strategy, you will need to make large investments before you can make significant gains and become profitable. In this sense, I advise you to initiate this action only if you justify a solid cash flow in the beginning.
- a momentary strategy : Be careful, your market penetration strategy should not be established over time. To be efficient and remain competitive, you must choose another policy after you have entered the market enough.
Entry Strategy: Explanation, Definition and Case Examples
In what cases should the penetration strategy be applied?
As I mentioned earlier, a penetration strategy should be made Invest in a fiercely competitive market, Therefore it is mainly used by entrepreneurs at the beginning of their activity.
However, this does not mean that it cannot be used in other stages of the life of the business. For example, whenslow sales period, The company also needs to gain new market share and find distribution channels.
Of course, this strategy is not necessarily suitable and suited for all structures. It will be necessary to conduct an in-depth marketing study before targeting strategy to be adopted. Knowing its strengths and weaknesses is important for developing a coherent strategy. Take special care thatit is not without risk, My clients sometimes mistakenly think that once they have entered the market, they have won.
Indeed, in addition to converting new customers, any business aims to: Gaining allegiance In this sense, the penetration strategy alone would not be sufficient to implement. So as soon as it is established, you have to think about the future.
Your customers have followed you because you were in a good position in terms of prices. So be careful if you plan to raise your prices at the end of this marketing action. don’t be surprised and anticipate the transition By doing a new market study. The goal is to stay relevant and find your way to everyone.
as an example
In my opinion, the most obvious example of a company implementing a penetration strategy is Free. The subsidiary made a sensational entry in 2012, reaching the telecom market in the 2000s. it appeared then Very low price compared to the competition For ADSL, telephony or television makes an offer similar or more advantageous than that offered by the competition.
Despite the fact that its competitors accused it of setting prices too low and therefore “smashing” the market, Free Manages to retain multiple clients and prospects To attach. Thus by gaining multiple market share, the company grows and becomes one of the essential leaders in telecommunications.
The penetration strategy is routinely used by freebies (usually every time a new product is launched). The company now ranks third among French Internet service providers.
On the other hand, this business practice gave it the image of a “low cost” supplier. she also gets some Difficulties establishing themselves in a high-end market, We can see this with the tough launch of its Delta product. A typical example of a badly anticipated marketing strategy.
Lastly, designing a penetration strategy is effective in gaining market share. Nonetheless, it remains a risky business practice. I would not recommend it to all companies, especially due to the large initial outlay at launch. Before implementing such a strategy, I invite you to do audit your situation Regarding customers. Thus you will be able to define the most consistent pricing policy for your structure.