What is Product Penetration? Benefits of Market Absorption for Principals?
Definition of Product Penetration in the Market
Product penetration is a measure of success of how much a product is sold in a particular market. This strategy is commonly used to determine whether a product is well received in the market or not.
Product penetration measurement indicators relate to how much and how fast the product sells in the market. This can determine the size of the potential market and develop strategies to increase the market share price.
Problems That Arise When Companies Don’t Monitor Product Penetration
1. Difficulty in production planning before the peak season
If brands and manufacturers don’t know how fast the absorption of products on the market is, it will be difficult to determine how long before the peak season, production must be increased. If production planning is not precise, manufacturers may fail to capture the momentum of increasing product demand.
2. No product availability indicator
A customer who is frustrated with an out-of-stock product will buy from a competitor or not buy at all. As a brand, your company will lose sales.
3. Products expire before entering the market
Apart from running out of stock, another problem that can occur when you don’t monitor product movement is how long it takes the product to travel before finally entering the store. If the principal immediately hands off the responsibility of the product when it’s sold to the distributor, they will not know how long the transportation will take. The worst scenario would be the product is nearing its expiration date when the product reaches store shelves.
4. Lose momentum for promos
If the principal does not know how long it takes for the product to be absorbed in the market, they can’t efficiently plan promotions, for example, product launching.
How Product Absorption Monitoring Works with Technology
Barcode and QR code on each product will be scanned at every point (factory and distributor warehouses) and every time the product passes through a sales activity. Advotics system can provide information on the location and status of products as they move along the supply chain in real-time. Management and supervisors can access a web portal complete with map visualization to track the origin of products and to find out the last position of the product.
Advotics Market Absorption Dashboard
Market Absorption at Advotics Product Distribution Management can provide Principal percentage of products that have been absorbed in the market. From this data, companies can analyze product sales during n months after the product is produced. This analysis separates products produced in certain months from other months so that market absorption data can be measured accurately.
Benefits of Market Absorption Analysis
1. Increase sales
The main goal of product availability and market absorption is to increase sales. If a strategy based on product absorption is implemented properly, this can lead to an increase in market share.
Companies can also analyze their products that are slow in absorption and carry out special sales strategies, such as bundling promotions with faster-selling products or other promotional programs.
2. Market leader
If a company has a high absorption of its products, they can be considered the market leader in the industry. Market leaders can reach more customers and have more effective shelf space than their competitors.
3. Market expansion
The strategy to increase market absorption is one way for companies to develop business in new sales areas or channels. Once a market is less interested in a product, or whenever the market becomes saturated, companies will start looking for other areas to expand their distribution range.