Market Penetration

Today I will begin a 4-part series on Ansoff's Product Market growth strategies, starting with Market Penetration. This strategy is used when a business attempts to increase the sales of an existing product or service to a market that it already caters to. This is often accomplished through the use of promotional techniques to drive the increase in sales.

The advantages of this technique are quite easily apparent. Since market penetration utilizes existing products in existing markets, it often requires the least investment from your business. Your business is also familiar with both the market and the product, which is beneficial to you, as you will be better able to determine how to undertake this strategy in order to succeed. It is considered the least risky of Ansoff's strategies, because it does not rely upon the uncertainty of new products or new markets. For these reasons, this is one of the first strategies that you can take into consideration when looking to expand.

By looking at a case study of Domino's Pizza, we can see a real-life implementation of this strategy, and just how successful it can be. Bear, in mind Domino's is a multi-billion dollar corporation, but the same strategies can be applied to your business.

Domino's Pizza, Inc. used this strategy in late 2009. Although Domino's already had a major share of the pizza sales and delivery market, they strove to increase their sales further by revamping their pizza recipe. This is clear demonstration of the market penetration technique, as Domino's is targeting an already utilized market with a similar product. Although the result is a completely different style of pizza, the product is still the same at its core: pizza. This overhaul of their recipe was coupled with a new promotional campaign in order to drive up sales. Their promotion focused on flaws of older recipes that were indicated by previous customers. In their advertisements, Domino's targeted dissatisfied customers, and promoted their new pizza recipe, which was designed to remedy the flaws that were inherent in the old recipe (Domino's Investor Relations). These advertisements played a major role in Domino's revenue increase.

This new promotional campaign was implemented in December of 2009. The results of this campaign became apparent in the 2010 fiscal year. Domino's total revenue for 2009 was 1.404 billion U.S. dollars. In 2010, Domino's revenue saw an increase to approximately 1.571 billion dollars. There was an increase of nearly 12%. The net income of the company rose from $79.7 million dollars in 2009 to $87.9 million dollars in 2010. (Domino's Annual Report 2010) The net income showed a jump of nearly 10%. These increases can mainly be attributed to the use of the new marketing campaign, and show how effective this strategy can be.

Hopefully, by reading about this real-life example, you can better understand the strategy and how to implement it so that it is the most effective for your business. Next time, we will go over the market development strategy, so keep stopping by for more updates!