Posted in Marketing and Strategy Terms, Total Reads: 1129
Definition: Penetrated Market
Penetrated market refers to the set of customers who is already using a particular product or service. In a penetrated market, users are aware of the product already and most of them are active users. Markets that are not penetrated are called target markets, potential markets or available markets.
A penetrated market with respect to the total population is depicted as shown in the following figure:
If the penetrated market for a particular product is high, it means that the brand or the category is popular in that market. The size of penetrated market for a product gives an estimate of the amount of scope of increasing sales in the un-penetrated market and the size of the target market. If the size of your penetrated market is small, it means that more investment should go into the strategy of marketing that particular product. High market penetration indicates that the product is an established product now and that the brand or the company is a market leader in that particular category. Trying to capture un-penetrated markets is important to increase sales and market share, but at the same time maintaining the customers in the penetrated market is also important. Careful attention should be paid to these customers so that they do not switch to competitors’ products.
Market penetration is calculated as the percentage of the company’s sales over the total sales of the product or in a category. For example, there are 400 million mobile phone users in India and company A’s mobile phones are used by 80 million people. Then the market penetration is (80 million/400 million)*100 i.e. 20%. This means there are still 320 million mobile phone users in India who can be targeted by the company.