Succeeding as a building materials manufacturer or supplier means not only broadening your customer base and gaining a foothold in new markets, but also winning loyalty in the niche markets you occupy in order to increase sales and profit margins year after year.
This requires developing go-to-market strategies that prioritize market penetration and achieving your goals around securing new channels of distribution, creating an appealing value-exchange alternative for your competitors’ current customers, servicing your existing accounts in order to keep them loyal, and establishing a stronger footing in untapped target markets.
How Do You Calculate Market Penetration?
Market penetration refers to the extent to which your product is recognized and purchased by customers in a given amount of time compared to the total target market for that product. It involves how well your company is increasing saturation in a specific market that you already occupy, as opposed to entering new markets.
The term market penetration often is confused with market share, but there are subtle and important differences. Your market share refers to the portion of total market value that you’re currently able to capture with your products, or that you could capture (i.e. your potential market share).
Market penetration is more specific, as it has to do with a targeted group and a set timeframe. However, increasing the market penetration for your various building products will also, in general, improve your overall market share potential.
To calculate the market penetration rate for one of your company’s products, divide the current sales volume for that product by the total sales volume of all similar products. This includes products that are sold by competitors. You then multiply the quotient by 100 in order to create a percentage.
Your sales information can be collected internally and then compared with market-wide data collected through telephone interviews to distributors and retailers regarding sales dollars of specific product types. You can secure that elusive information via custom market sizing research.
How can Market Penetration be Improved for Building Materials?
To improve your product’s market penetration rate, you have to be intentional about positioning yourself more competitively in a market you occupy. This starts by genuinely understanding your customer. Then you can identify and implement strategies to increase saturation by solving for the customer and presenting value that competitors are missing.
Here are a few ideas for strengthening your market penetration strategy:
1. Implement Price Adjustments to Attract New Customers
One market penetration strategy to consider is adjusting the price on your building material or product to make it more appealing to new audiences within your target market. Penetration pricing is a type of marketing strategy wherein manufacturers set a lower price on a new product to aid in its initial introduction into the market and entice potential customers to give it a try, with the intention of raising the price to normal levels once you’ve developed a certain level of brand loyalty. Targeted discounts and promotions may also help give your product a little boost if you’re struggling to gain traction in a particular market, but would need to be evaluated within the context of your brand values.
2. Enhance or Update Product Features
Each individual target market only contains so much potential, unless the market segment itself is growing at an exponential rate. Therefore, in order to increase your market penetration, you must be able to draw existing customers away from your competitors and toward your products.
One way to do that is through strategic product enhancements and adjustments so they are more appealing to contractors or to DIY homeowners. Consider what questions are currently left unanswered in your teams’ understanding of customer pain points, preferences and needs. Then, find the best way to answer those questions in order to inform your go-to-market strategy.
The same goes for understanding how customers perceive your competitors’ products. Are there ways in which they aren’t entirely satisfying the needs of customers? You can get answers to those questions too. Then, by adding those desired features to your products, you can make them stand apart and improve their performance in the market.
3. Develop Effective Channel Strategies
It’s important to expand your client base, but it’s also important to nurture the customers and accounts you already have, whether those be with big box stores, independent retailers, or individual contractors. Your sales representatives should be well trained in strategic account management in order to ensure brand loyalty and to aid your efforts in siphoning some of what your customers are spending on your competitors.
Effective channel management in the building materials industry also comes down to performing strongly year after year at product line reviews. Ultimately, your channel, product, and marketing teams need objective information in hand as they defend your brand’s position on distributors limited shelf space. Custom market research will equip your team with data-backed findings to lend insight into how having your brand stocked will enable the distributor to move more products and increase foot traffic to their location(s). As a result, your team will gain the vote of confidence from the product line reviews.
Be intentional with maintaining quality relationships with existing customers and effectively implementing cross-selling techniques for your products. Show your customers you appreciate them with loyalty and bulk order discounts, product samples, responsive customer service, product tutorials, and other valuable gestures. Point them in the direction of additional products you manufacture that could complement the ones they’re already purchasing from your company.
4. Refresh Your Marketing Strategies
Another example of a market penetration strategy is to update or invest more funds into a marketing campaign for your building product that is tailored to your target market or even a new audience within that market.
You might consider developing new marketing strategies to promote your product across various channels or localizing your advertising to specific geographical markets to better connect with customers in that region. In a similar vein, you may need to ensure you’re adequately supporting direct customers and independent retailers and giving them the same attention as big box stores or other national distributors.
Take time to ensure they understand the benefits of your brand’s products over similar items on the market so they can more easily sell your products to their customers. Give them tools and strategies to boost their own success in terms of gaining market share, and you’ll increase your market penetration as a result.
5. Consider Partnerships, Acquisitions and Collaborations
Additionally, you can increase the penetration of a product in the home improvement market by generating new partnerships with resellers, distributors, and installation service providers that are already well-established among your target customer base. Acquisitions and mergers are similar methods for growing within a shared market space. You can leverage the reputation and loyal customer following of these other businesses to collaboratively expand the reach of your building materials product.
When you choose to partner up, be selective. Find those providers and retailers who are offering goods and services that complement your product.
Improving the Market Penetration Strategies for Your Building Products
The best place to start when developing new penetration strategies for your building materials company is with a clear understanding of your product’s current performance in your existing target market, as well as the potential for greater saturation. Conducting customized market research with The Farnsworth Group will give you the data you need to effectively define goals and opportunities for your product, your customer segment, and your distribution channels to sustainably increase your brand’s market penetration rate.