Disadvantages of business diversification. For example, when prices are already low, it means that consumers have already built trust towards an existing company, so entering the market and trying to beat the price of the competitor is an ineffective way to act. So, business expansion usually requires funds, especially if the company plans to develop a new niche. Finally, they need to track their progress and make adjustments as needed. One of the advantages of a product development strategy is that you can respond to customer needs as they change. food delivery, bikes, scooters, etc. Market Development is best used when a business wants to expand into new markets. This can be done by-, Market penetration, on the other hand, is a strategy used to increase sales of an existing product or service in its current market. The choice is yours. The platform follows the market development strategy. For a small business, it is difficult to have the access to the plethora of resources and capital investment to hire expert professionals. You may need to borrow money to buy new premises or equipment to expand. SEO and content marketing would allow you to approach customers and rank up in the searches. Whether you could achieve any competitive advantage, whether the market has already been through the saturation phase. ), market development strategy (i.e. There are many ways to increase market penetration. Unmet Production Costs Its not always possible to lower the product price as you will. Though you may have an innovative idea and a capable team to execute, there's no guarantee of success. Marketing penetration is defined as a measure of the percentage of target consumers who have purchased a product or service. For instance, when a firm aims to increase sales, lowering prices is an effective tactic to attract potential customers. Creating a marketing strategy will help you discover what makes you different so you can map out a clear strategy to communicate those benefits. Promoting a favorable image. You can update your choices at any time in your settings. Then the sales team uses them to demonstrate the product's competitive advantage. This can be done through discounts, coupons, and special promotions. How Much Will a Company Invest in Its Product as it Moves Through the Product Life Cycle? This could involve setting up new offices, opening new stores, or expanding your distribution network. To find new potential markets, companies must carry out systematic market research. Working with resellers is a great way to increase market penetration. The market development strategy helped Poached Jobs to stabilize its growth and focus on the current market one at a time. ), and product development strategy. You must have JavaScript enabled to use this form. Fixed costs don't change with the number of units you produce, whereas variable costs do. The market strategy reduces your risk factor by telling you the type of product or service you should produce and the market to enter. Do I qualify? The strategy revolves around geography, customer base, and the products. As the software became the Facebook we know today, it became increasingly important to reach new users and markets in order to expand. When you expand your customer market, then it brings a lot of new opportunities in terms of more revenue, sales, and new leads. In turn, this can give you fresh ideas about how to market, and who to market to. ride sharing, luxury upgrades, etc. Your email address will not be published. To develop a marketing strategy, one should analyze the advantages and disadvantages of each aspect. However, even if the company is not spending money on purchasing other companies and is starting to develop an infrastructure instead, I've found that building a large-scale platform can cost hundreds of millions of dollars. It will give you a plan and a clearer focus. A marketing strategy gives you more control and allows you to diversify your sales channels. Resellers are businesses that sell products or services on behalf of other businesses. Here is a video by Marketing91 on Market Penetration. Image: Marketing Strategy Advantages & Disadvantages. These decisions may feel small when they involve things like who to hire and when, but they will almost certainly feel more consequential when they involve things like optimizing sales models, pricing models, and high impact growth strategies. Also, this way you can increase product sales, distribution channels, gain extra space on the market and overall profitability. However, no one knows the key features of your product better than you. Simply put, a market development strategy can be an excellent choice for business growth. Market Penetration is a strategy employed to grow sales, while Market Share is a metric used to compare a companys sales to the total sales of all companies in a given market. Like who to hire and when to share the responsibility, they may seem small steps. However, deciding the appropriate marketing strategy is a matter of personal choice in some cases. Disadvantages of Product Development Strategy Riskiness. Your email address will not be published. 0800 181 4422. This can be done through traditional methods such as television and print ads, or through digital methods such as online banner ads and social media campaigns. Buyers always want better and when the opportunity comes, they always shift towards the best. Thus, the development efforts of the organization are focused on characteristics that are most widely demanded. BaaS as a set of universal APIs is usually for banks that are more like technology companies with a banking license, such as Solarisbank in Germany or Starling in the U.K. Disadvantage: Cost Executing successful marketing strategies often takes time, money and resources and for a small company especially, that can be frustrating. Consumers mostly fall for the trick because the interest and curiosity that the improved product drives are irresistible. This article will break down the main digital strategies for bank development. Would your product be successful in the new market? During this process, the cost is usually the main factor that determines the pros and cons of a strategy. Some tactics, for example, may employ advertising alongside social media campaigns and direct sales outreach to target consumers in underpenetrated areas. Companies do so by meeting the list of requirements that customers are demanding. The strategy that is more attractive for one group may not be interesting for another group. If youre not sure how to get started, Market Development Strategies can help. Low prices that guarantee customer base growth, means that you can increase the quantity of products ordered from the supplier, which will result in higher profits gained from low prices. Market penetration can lead to fast growth for a company. Use tab to navigate through the menu items. As your business grows, its important to consider ways to increase your market share. The below-given equation will help you find out how much of a product or service is used by customers in comparison to its total estimated market i.e. Improve your existing product? A larger business requires a larger workforce, more facilities or equipment, and often more investment. Developed in 2009, and initially introduced to a small San Francisco market in 2010, Ubers aggressive market development strategy has landed them in over, The NBA has always dominated the relatively large and lucrative market for professional basketball here in the United States, but the league also had the foresight to recognize how much more lucrative business could be if they could successfully bring their product to international markets. Price Adjustment One of the most frequently used market penetration strategy is price adjustment. Its because of diversification (scooters, bike, food delivery, etc.) If you are developing a strategy campaign, then you should keep in mind its pros and cons. A good example of market penetration is the brand Coca-Cola. Lowering Industry Prices Market penetration strategy can harm the entire organization. 2023 Lighter Capital. Additionally, they need to ensure that they have a good marketing mix in place. Market penetration is often more economical than other marketing strategies. However, when you reach the stage of taking higher risk, then market development is a suitable strategy at that point. Increased Promotion Investing more time and strength in a promotion can dramatically increase market penetration. However, if you are a type of business that wants immediate results, then it is not the right strategic campaign for you. By implementing a market development strategy, the NBA brought televised games to China, where just a decade later its become the most popular sports league in the country and. Lastly, time consumption is another disadvantage of Nike's "just do it" campaign. Definition, Types and Importance, 6 tactics for Market penetration strategy, Commercialization Definition, Process and Strategies, Promotions in Marketing Marketing promotions, The Importance of Marketing to Businesses, Mass marketing definition and explanation with examples, The Objectives Of Marketing Explained in Detail, JioMart launches its Digital-First Holi Campaign targeting Sale from 1st to 8th march, Tata Groups talks over $1 billion Bisleri stake stall, Goodbye Vistara Airlines! Every marketing strategy has its own advantages and disadvantages. While market penetration is the lowest risk growth strategy, market development is a close second because unlike product development and diversification these two strategies dont include the extremely high risk nature of developing and selling a new product. Here's how to calculate cost-plus pricing:: 1. For example, if your organizations primary source of income is selling through retail outlets, it can open other channels like email marketing, telemarketing, etc. Another example of market penetration is the online retailer Amazon. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. As a new business owner, there are many questions you'll need to tackle. In fact, your strategy can include customer surveys and evaluations of. Market penetration is important because it allows for easy diffusion of a product or service in the market. If you thought this was useful, youll love getting Lighter Capital's thoughtfully curated monthly e-newsletter. It will help you analyze and understand your message and how to effectively reach a larger pool of prospective customers. 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