I thought this would be a good forum to elaborate on what I referring to in class when calculating market penetration. The equation I referenced was (target market) x (awareness) x (purchase intent) x (all commodity volume: ACV).
Purchase intent represents the percentage of the target market that would likely purchase your product or service assuming they are aware that it exists. Similar to awareness, purchase intent would also need to be calculated by target segment.
Awareness represents the percentage of the target market expected to be aware of your product/service. This figure is usually based on the combination of various marketing techniques and ideally increases in the long-term. For example, let's suppose we are selling a new toy - the awareness calculation for the first year could be as follows:
Awareness (Year 1):
- PULL Strategies:
- Magazines/newspapers: 1.5%
- Events: 1.0%
- Online: 6.0%
- Transportation media: 0.5%
- Play centers: 0.5%
- Word of mouth: 0.5%
- PUSH Strategies:
- Public relations: 1.5%
- Point of purchase: 2.0%
- Awareness per segment:
- Children: 10%
- Parents: (18-65): 20%
- Grandparents: (65+): 8%
- Weighted awareness: 14%
Purchase intent represents the percentage of the target market that would likely purchase your product or service assuming they are aware that it exists. Similar to awareness, purchase intent would also need to be calculated by target segment.
ACV represents the proportion of the target segment that you would be able to physically reach in order to provide your product or service. This calculation may be harder to derive at first until having more color regarding your distribution, cost and capacity constraints.
Hope this was helpful. Clearly there are numerous other methods of calculating market penetration, but this is one technique that I found to be useful.
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