Market penetration, market development and product development strategies are sometimes referred to as Intensive Strategies, as they require intensive efforts on behalf of the organization to achieve the desired results. If an organization is looking at competing in the already competitive market with its existing products, then it has to make an extensive use of these three strategies: Market Penetration, Market Development and Product Development.
Let’s take a deeper dive into these three strategies:
Market Penetration Strategy
Market Penetration
Market penetration is one of the most commonly used strategies for beating the competition through existing products range. The strategy seeks to increase the market share of present products or services in present markets through extensive marketing efforts. The best example of the use of market penetration strategy is the FMCG industry. FMCG industry in India is dominated by major players like Nestle, HUL and Britannia. The cut- throat competition among various brands for their specific market share needs the use of intensive marketing strategy by these various FMCG companies. Market penetration strategy requires a successful product like “Maggi’ and a strong understanding of the market and close competitors for the product. Product options like Yippee! Noodles and Top Ramen are the closes rivals for Maggi as a brand but extensive marketing efforts by Nestle and the strong brand identity of the product which is well- known for its taste has always helped it to maintain its topmost position in the market.
What are the Main Strategies for Getting Market Penetration into Action?
Increasing the number of Salespersons
Increasing Expenditure on Advertising Efforts
Offering Extensive Sales Promotion Items
Expanding the Publicity Efforts
Some companies usually purchase premium advertising slots during World Cup Cricket Tournaments, as it helps in increasing brand awareness and brand recall with the help of extensive advertising on the media platform.
What Points Should be Taken into Consideration Before Moving Ahead with Market Penetration Strategy?
Market penetration strategy requires a deep understanding of the market and the competition, and the study conducted for the purpose should revolve around certain factors. These factors will determine the effectiveness of the penetration strategy:
The company should not work in a fully- saturated market for the product under consideration.
The Usage rate of the product or service should increase significantly with the implementation of the strategy.
Increased economies of scale should be taken into consideration, as they provide the relevant competitive advantage.
The correlation between total sales and marketing expenditures should be on the higher side.
Industry sales should show an increasing trend, while the market shares of the main competitors for the product should show a declining trend.
Market Development Strategy
When a company explores a whole new market, it plans and executes a strategy to introduce an existing successful product in the new market. This strategy used by the organizations all across the world is known as Market Development Strategy. For e.g., Amazon.com launched its e- commerce services in all the geographical locations of the world in various phases. Starbucks used Market development strategy for opening its outlets in various geographical locations across the world in a strategic way. Whirlpool acquired Indesit an Italian company to increase its market size in Europe. This move was taken to beat its toughest competitors in the European market; Electrolux and LG.
What Makes a Market development Strategy Effective?
Presence of new distribution channels that re reliable, inexpensive and have a good quality.
A very successful product like Nestle Chocolates.
Availability of new, untapped markets which are not saturated.
Availability of required capital to manage the expenses for geographical expansion.
Availability of the required Production capacity.
Globalization of the industry under consideration.
Product Development Strategy
Product development strategy involves the use of various market research methods in order to introduce a modified or new product to the existing market. The best example in this case is a smartwatch. Smartwatches are an innovative form of wrist watches, as they are an improved modification of the existing product in the market. Product development strategies are completely based on technological innovation rate in the industry. Tech related products like watches and smartphones see a new product more frequently than the products in the FMCG industry. The industries are equally competitive but technological innovation in tech related products leads to an introduction of more new products in the market on a frequent basis.
Take the example of gaming industry and see how gaming has evolved over the years. Moving on from DOS games to console gaming, the industry has moved on to Metaverse gaming and VR headsets. The whole gaming industry today is working on providing a rich and immersive gaming experience to the players and this has made the competition intense with the expected launch of gaming gears like Sony PSVR2 and Apple VR in the gaming market.
Product Development strategy is not limited to tech industry or FMCG industry, as there are endless opportunities for product development strategies for every industry in the market. Right from making smart refrigerators to smart homes, every industry across the world is working on bringing a new product to the existing market.
What factors are important for the Effectiveness of the Product Development Strategy?
The existing customers of a particular product or service should be satisfied with the services provided by the company through its existing products or services.
Rapid Technological Development is at the core of the product development strategy.
The industry should be inclined towards a high- growth trend.
Capability to perform extensive research is important to proceed with the Product Development Strategy.
A company can choose either of the three or all the three strategies for increasing its market share in the existing competitive market. The strategy chosen by the company needs the presence of a strong product and an excellent understanding of the competitors in order to deliver the required results.
