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Market penetration is an important concept in business planning and development. When you think in terms of market penetration you are figuring out they type and number of client you need in order to meet your revenue projections. Your market penetration strategy must also consider the types of businesses in terms of your geographic location.
You can't simply choose your market penetration strategy arbitrarily. It has to be grounded in research of the businesses in your geographic area. You need to figure out how many businesses of a certain size and type exist and then tailor your market penetration strategy around the results.
Geographic Market Penetration Research
When you start thinking about the type of customer you need to target to meet your revenue goals it is wise to set up a grid. This grid will track the type and number of business based on geographic location.
Start by putting your business in the middle of a grid.
Then move out in concentric rings further and further from where you're located.
What businesses are 15 minutes from where you are, 30 minutes from where you are, etc...? Do not go beyond 90 minutes. Remember you need billable hours so you can't take up your whole day driving to and from clients' places of business.
Figure out the different size levels of the businesses in your area.
How many business with 1 to 10 employees and 100k to 1 million in revenue are within 60-90 minutes?
How many of these sweet spot clients are within 15 minutes, 30 minutes, etc.. from you?
Then track large small-businesses with 50 to 200 employees and 50 to 100 computers the same way.
To gather the type of business size information you need for your market penetration research there are a variety of sources to consult including:
- libraries
- economic development or small business assistance offices
- mailing list brokers
- online research
- direct phone inquiries
- Dunn and Bradstreet
- Zap Date
- Info USA
The Bottom Line on Market Penetration
Market penetration must be looked at in terms of the business base in your geographic area. You need to first determine the revenue you must generate and then look at the businesses within your area that can support these revenue projections. A good market penetration strategy is one that considers your geographic business base and revenue projections in conjunction with one another.
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Market penetration refers to the process of gaining market share by introducing your product to customers. When you are planning your business strategy it is important to consider market penetration issues in terms of your revenue goals. If you need to generate a certain level of revenue, then a market penetration analysis will help you determine the type and number of customers you need to achieve your target.
Market Penetration Analysis
First you need to determine your revenue goal for the next twelve months. Then you need to figure out how much of that revenue will be generated per client.
Let's look at an example:
Say you wanted to do $120k in revenue for your company within the next 12 months. In terms of market penetration you have to determine whether that is going to be earned from six clients at $20k each, 12 clients at $10k each, or 20 clients at $6k each?
Market penetration analysis forces you to consider your average client size. This will help you determine your sweet spot customer. The bigger the client the more services you can provide and the fewer clients you need overall and vice versa. But this is only the first step.
To make market penetration decisions you also need to analyze the number and types of businesses in your area. Are there enough businesses who can afford $20k of service per year? It's fine to have a market penetration strategy that targets large businesses but this target market must be realistic. By fitting your market penetration strategy with the types of businesses in your area you will be able to achieve your revenue goals.
The Bottom Line on Market Penetration
Market penetration is a strategy that looks at the type and number of target customers for you business. It is a strategy that starts with your total revenue goal. Market penetration is important to your overall business success and you need to make sure that you sweet spot clients will actually be able to generate the amount of revenue your business needs.
Copyright MMI-MMVI, Computer Consulting 101 Blog. All Worldwide Rights Reserved.