Market Segmentation and Market Penetration are two business growth strategies you can deploy to win more customers, grow your market share and maximize your profit.
While both strategies have their benefits, it’s important to choose the one that will work the best for your business and the market you’re targeting.
In this article, you’ll learn the difference between Market Segmentation and Market Penetration.
Why Market Segmentation?
Market Segmentation is the process of classifying the entire target market into smaller segments based on different customer or consumer characteristics.
By segmenting the market, Marketers can decide which segments will be the most profitable, and accordingly they can market differently and more efficiently to each segment. They may also choose to completely ignore one or more segments.
For example, a company that sells luxury cars may decide to target affluent customers as one market segment. They would, therefore, segment the market based on price. To reach this group, the company might create marketing materials that are specifically geared towards high-income earners and use media outlets that these individuals are likely to be exposed to. And the company may completely ignore low-income individuals.
Another example would be a company that sells pet food products. This company might decide to target pet owners who have a certain type of pet, such as dogs or cats. Owners of dogs will have similar needs with each other. Similarly, owners of cats will have similar needs to other cat owners. By segmenting based on needs, the company could then create marketing materials and advertising campaigns that are geared specifically towards these groups of people.
A company that sells energy drinks could choose to target athletes as one market segment. The company might develop marketing strategies that focus on the benefits of their product for athletes, such as increased energy and improved performance.
Why Market Penetration?
Market Penetration is the strategy used to go deeper or penetrate an existing market or segment to grow a business’s market share.
In general, Market Penetration strategies are often used by companies that have a strong foothold in an existing industry but see the potential for growth and want to gain share from competitors or new entrants.
Market Penetration is a strategy that should be used by businesses who want to grow their market share and take advantage of an existing demand or need in the marketplace, which may not currently be satisfied by competitors.
Market penetration can lead to increased sales and profits more quickly than other strategies such as product development; however, it is important to note that market saturation can be a major risk.
Differences between Market Segmentation and Market Penetration
| Market Segmentation | Market Penetration |
| Market Segmentation is the process of dividing a market into groups of customers who have common needs and wants. | Market Penetration is the effort to increase market share in an existing market or segment. |
| Market Segmentation is used to focus on specific markets/segments which are most likely to buy a product or service, and which are likely to be the most profitable. | Market Penetration leverages existing strongholds and can help a business grow in multiple markets or segments so long as they have a strong presence in each of them. |
| Market segmentation often involves a company differentiating their product or service from others in the industry which can lead to higher prices. | Market penetration, on the other hand, often involves charging lower prices than the competition to gain market share. |
| Market Segmentation is a long-term strategy to enter new markets or segments. | Market Penetration can be a short-term strategy to quickly increase market share. |
Conclusion
In conclusion, if you have a strong foothold in the market and want to grow more in it, Market Penetration may be the best strategy for you.
If the market is very competitive or there are large players in your industry that will make it difficult to gain share, Market Segmentation may be a better option. Even though larger companies with more resources and strong brands can segment markets effectively they can struggle to break into those segments themselves. Or they may choose not to enter a segment and thereby create an opening for you.
When making a choice between Market Segmentation or Market Penetration or other growth strategies, it is crucial to consider your unique business needs.
