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Difference Between Market Penetration and Market Development

The end goal of any business is to make a profit and maximize the margins. And with the rising competition in most sectors, enterprises are left with no option but to come up with strategies to achieve the desired results. Depending on a firm’s aim, this could be adopting efficient processes or developing better products. Other businesses may opt to expand the regions they serve, a strategy referred to as market development. Similarly, businesses may opt to increase the focus on selling in the same market, a strategy referred to as market penetration. In this article, we will look at the difference between market penetration and market development. 

Market Penetration

Market penetration is a business growth strategy that focuses on selling existing products to already existing markets. This strategy carries less risk since the products are already known in the market. Despite the less cost, it may not give the desired results especially in instances where the market is saturated. 

Businesses that incorporate market penetration into their marketing strategy often need to add other strategies for steady growth. However, it is a great starting point for brands since it promotes growth without the risk that comes with new markets. 

Market penetration strategies that enterprises can apply include: 

  • Attracting new buyers in the current market– This strategy aims to convert occasional product or service users into regular users. The more loyalty the brand builds, the more repeat sales hence more profits. A change in the pricing model (fair pricing) and free samples coupled with aggressive marketing gives new users the chance to try out the products. 
  • Make products more appealing– Businesses may offer a similar product. However, products become more appealing due to fair pricing, amazing customer service and quality maintenance among others. 
  • Increase the distribution channels– One of the main reasons why customers opt to try other products is the unavailability of their products of choice. This can be eliminated by increasing the distribution channels. 

Advantages of market penetration

  • It discourages competitors from entering the market which is a competitive advantage
  • It increases goodwill with the consumers due to the aggressive marketing
  • It leads to quick adoption of products and services in the market
  • It increases both a brand’s sales volume and market share

What are the cons of market penetration? 

  • Lowering the prices may cause financial obstacles if the production costs are high
  • It may not ideal for some products such as luxury products
  • It may taint a company’s image if customers become more familiar with the ‘cheaper product’
  • It may cause lowered industry prices through unhealthy competition

Market Development

Market development is a strategy that identifies new market segments and develops them for current products. It is also referred to as a blue ocean strategy since effects from competitors are minimal. 

Some market developments strategies that can be applied include:

  • Entering into a new geographical market– Despite the promising returns, this strategy requires proper analysis and careful considerations. As such, brands must ensure they grasp the needs of the new market, demand, competitors, pricing and market growth rates before diving into the investment. 
  • Improvising the uses of an existing product– This enables brands to hunt for more customers. Customer interviews can reveal different ways in which they use the same product. 

What are the advantages of market development? 

  • Brands can expand their customer base
  • When strategically done, firms experience growth
  • Businesses gain a decisive edge over competitors
  • Increased revenue

What are the disadvantages of market development? 

  • It poses high risks since businesses are entering into new markets

Similarities between Market Penetration and Market Development

  • Both aim at increasing revenue by increasing the client base

Differences between Market Penetration and Market Development

Definition

Market penetration is a business growth strategy that focuses on selling existing products to already existing markets. On the other hand, market development is a strategy that identifies new market segments and develops them for current products.

Strategies

Strategies employed in market penetration include attracting new buyers in the current market, making the products more appealing and increasing the distribution channels. On the other hand, the strategies used in market development include entering into a new geographical market and improvising the uses of an existing product.

Risk level

Market penetration poses fewer risks since users are already familiar with the products. On the other hand, market development carries more risk since the bands are introducing products to new markets. 

Market Penetration vs. Market Development: Comparison Table

Summary of Market Penetration vs. Market Development

Market penetration is a business growth strategy that focuses on selling existing products to already existing markets. It poses fewer risks since users are already familiar with the products. On the other hand, market development is a strategy that identifies new market segments and develops them for current products. It carries more risk since the bands are introducing products to new markets. 

FAQs

What is the difference between market development and product development?

Market development focuses on identifying and developing new markets for existing products while product development focuses on the development of new products in existing markets. 

What are the key differences between market penetration and product development strategies?

The focus of market penetration is increasing the sales for an existing product in an existing market. On the other hand, the focus of market development is using existing products to enter a new market. 

What is meant by market development?

Market development is the development of an existing market as opposed to entering a new market. 


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References :


[0]Kristina Bachmeier. Analysis of Marketing Strategies Used by PepsiCo Based on Ansoff's Theory. GRIN Verlag, 2009. https://books.google.co.ke/books?id=sw3qK18Rv-UC&printsec=frontcover&dq=difference+between+market+penetration+and+market+development&hl=en&sa=X&ved=2ahUKEwit9a-jo-D1AhXD0eAKHRW0DhgQ6AF6BAgJEAI#v=onepage&q=difference%20between%20market%20penetration%20and%20market%20development&f=false

[1]Thorsten Grunwald. BUSINESS DEVELOPMENT. epubli, 2014. https://books.google.co.ke/books?id=k4fCAwAAQBAJ&printsec=frontcover&dq=difference+between+market+penetration+and+market+development&hl=en&sa=X&redir_esc=y#v=onepage&q=difference%20between%20market%20penetration%20and%20market%20development&f=false

[2]Richard Lynch. Strategic Management. SAGE, 2021. https://books.google.co.ke/books?id=MyAMEAAAQBAJ&pg=PA298&dq=difference+between+market+penetration+and+market+development&hl=en&sa=X&ved=2ahUKEwit9a-jo-D1AhXD0eAKHRW0DhgQ6AF6BAgHEAI#v=onepage&q=difference%20between%20market%20penetration%20and%20market%20development&f=false

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