Penetration rate

Penetration measures the popularity of a product in terms of usage or purchase. It is a function of the number of people who buy a product category or a particular brand and the size of the relevant market. Start-ups and established businesses use this metric to evaluate the effectiveness of their product development and marketing strategies. Strategies to increase the penetration rate include adjusting the marketing and packaging strategy to generate sales growth and increasing the total market size by attracting new customers.

To determine the market penetration of a product, it is the number of people who buy or use a product divided by the relevant market size, expressed as a percentage. For example, if 1,000 homes in a residential subdivision of 100,000 homes have air conditioners, the market penetration rate is 0.01 (1,000/100,000), or 1 percent.

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