Market penetration is a measure of product or service utilization by customers compared to the total market size for that product or service. However, market penetration can also be defined as the act of entering a market with a product and taking market share from competitors.
Understanding market penetration as a measure
When we talk about market penetration as a measure, we are talking about how much of a product or service is sold relative to its total estimated market.
This is expressed as a percentage such that the market penetration rate is equal to the number of customers divided by the total addressable market (TAM) multiplied by 100.

Determining the size of a market can be difficult and depends on the nature of the product. What’s more, “acceptable” market penetration rates vary from one industry to the next.
For consumer products, the average rate is 2-6%. In business, 10-40% is more common.
SaaS companies would do well to earn 10% of the TAM, while tech leaders such as Apple have a penetration rate of around 19% in the smartphone industry.
For smaller competitors such as Oppo and Xiaomi (7%), there exist opportunities to steal market share from others.
This brings us to the next definition of market penetration.
Understanding market penetration as an activity
When we talk about market penetration as an activity, we are referencing a strategy first mentioned in the Ansoff Matrix developed by Igor Ansoff in 1957.
Unlike market development – where a company enters a new market with existing products – market penetration involves the company selling more of an existing product in an existing market to increase market share.
Market penetration is also the least risky of Ansoff’s four strategies because management is already familiar with the market, owns the necessary infrastructure, and enjoys existing relationships with suppliers, customers, and other key stakeholders.
Some market penetration strategies
1 – Utilizing more distribution channels
Companies looking to increase market share can revamp their marketing strategies to consider the various traditional and digital channels available to them.
While it’s important to only use channels that make sense for the brand, it is worth considering whether a direct, indirect, or dual-channel approach is more effective.

2 – Mergers and acquisitions
Mergers and acquisitions are one of the most effective (and expensive) market penetration strategies.
Some firms prefer to retain the names of acquired brands, while others may choose to incorporate all products under a single brand.
3 – Price adjustments
For a company that wants to increase market share with an existing product, two choices immediately spring to mind: either raise product quality or adjust prices.
Note that adjusting prices does not necessarily mean lowering them. For example, a university that sells an expensive online course may offer a payment plan to appeal to students with less disposable income.
Key takeaways
- Market penetration is a measure of product or service utilization by customers compared to the total market size for that product or service. However, it also describes the act of entering a market with a product and taking market share from competitors.
- Unlike market development – where a company enters a new market with existing products – market penetration involves the company selling more of an existing product in an existing market to increase market share.
- There are various strategies available to companies that want to increase market share with an existing product. Those with deep pockets may find mergers and acquisitions the most effective. For others, price adjustments and utilizing different marketing channels may be more realistic.
Related Market Development Frameworks





Stages of Digital Transformation

Platform Business Model Strategy




FourWeekMBA Business Toolbox











Asymmetric Betting





Other business resources: