Market development and market penetration are valued strategies for sustaining and growing a business. Each has merits, and many businesses use a combination of both strategies to anchor periods of rapid growth with sustainable, long-term revenue models. The strategy behind each method involves marketing, pricing and the ways in which a business interacts with an audience and market.

Benefits and Pitfalls of Market Penetration

Market penetration is ideal for new companies and products without an existing customer base. Your brand or product is relatively unknown, and you want to shake things up while grabbing attention and a segment of the market share. Pricing strategy for market penetration often involves a lower price than the competition. Combining an aggressive advertising and media campaign with a low price point is used to effectively penetrate competitive markets. The benefit of a market penetration strategy is the ability to quickly enter the market and make an impact. The downside is the reduced margins on sales, and on the costs associated with advertising your new business and on promotional pricing. It's a short-term strategy to position a product or brand in the early life cycle.

Market Development for Long-Term Growth

After you penetrate a market and build an audience base, developing that market creates sustainable growth. Introduce new products and services to the existing customer base and expand your total market through continual advertising, communications and audience development. Market development involves trust building, expanding geographically and fine tuning things like packaging, sales copy and processes to maximize conversions and revenue.

Working the Strategies Together

Market penetration and market development are not mutually exclusive. Once a market is penetrated, the ability to up-sell and development within that market is available. A company looking to develop a new geographical region or new demographic will execute a penetration strategy to gain an initial foothold before developing a long-term presence. Penetration is also used to test markets and validate before investing in long-term development. Penetrating will test the response from competitors and give you a gauge of how your product or service will perform after the initial activity spike.