How Will Market Penetration Help Your Business Grow?

What Is Market Penetration?

Market penetration is the measurement of sales volume of an item or service compared to the total market for that item or service.

This is usually expressed as a percentage that’s used to measure how much of a particular market your eCommerce marketplace is achieving penetration for your different categories and items.

The market can be segmented by region, category, etc., and can get really granular.

Why Is Market Penetration Important?

Market penetration is a huge part of market development. If you want to grow your business and be successful in the market, analyzing and optimizing market penetration is key.

Identify Trends

With the percentage of how well your products are making it in the market, you can identify trends within the marketplace eCommerce platform, and with how well your team is executing within a given market.

You can also see opportunities for resolving issues and reconciling challenges within your market.

For example, maybe some of the vendors have increased the pricing too much within the marketplace.

Perhaps your pricing model for commissions, or the percentage you’re getting from what your vendors sell, is too far in a particular direction such that the marketplace is no longer competitive compared to some other offerings. Shipping and logistics might be a challenge.

These are all things that will affect market penetration. It may start out slowly, but the market reduction will pick up a lot of steam over time.

So, you want to watch the trends because you can then identify whether or not you’re on an upward trend or increasing market penetration.

If you’re not increasing it, there’s probably something wrong. If you’re holding steady, it’s probably a precursor to going down.

Become the Main Supplier & Expand Your Offerings

Within certain markets, different marketplace eCommerce platforms can become the known supplier within that particular category and possibly related categories.

This is another advantage to be aware of when it comes to market penetration.

If the marketplace becomes a dominant provider within a particular category or focus area, this leads to additional related market penetration.

This results in the expansion of the marketplace beyond the realm of the base area of market penetration.

For example, let’s say there’s an automotive marketplace, and the market penetration is at 30 to 40 percent for a particular set of replacement parts, e.g., brake pads and brake rotors, and anything wheel-related.

This could lead to the ability to offer tires and different types of tire covers, and resources that are related to these things.

Once you reach a certain level of market penetration, this can yield compounding benefits where you can get a level of market saturation where the level of marketing efforts necessary for increasing results in market awareness can go down.

By using a simple marketing model of transactional marketing, where you already have 30 to 40 percent of the market, you can send emails to this penetrated portion of the market, letting consumers know that,

“We used to only offer tires. Now we also offer windshield wipers and headlight replacements.”

The list could go on. You can keep expanding and penetrate further into the market just from the marketplace-wide transactional emails, which don’t cost anything in dollars.

Decrease Advertising Costs

This simple marketing model can be achieved once you reach a certain level of market penetration, because then the advertising cost decreases whereas the payoff from the results continues to rise.

This is particularly why penetration within a specific market can be fundamentally a game changer for marketplace.

Create the Ideal Environment

If there are high-quality items, or unique or valuable items, the governance model can be such that the marketplace itself is supportive of returns or other types of shipments.

In other words, it can reconcile issues and deal with problems reasonably for the buyer and seller.

This creates an ecosystem where everyone is comfortable withing with this particular marketplace.

This contributes to an upward spiral for the marketplace, as everyone is more willing to work with it and recommend your marketplace to others.