what is market penetration 
market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service market penetration can also be used in developing strategies employed to increase the market share of a particular product or service investopedia jiaqi zhouunderstanding market penetrationmarket penetration can be used to determine the size of the potential market if the total market is large new entrants to the industry believe they can gain market share or a percentage of the total number of potential customers in the industry for example if there are 300 million people in a country and 65 million of them own cell phones the market penetration of cell phones would be approximately 22 in theory there are still 235 million more potential customers for cell phones or 78 of the population remains untapped the penetration numbers might indicate the potential for growth for cell phone makers in other words market penetration can be used to assess an industry as a whole to determine the potential for companies within the industry to gain market share or grow their revenue through sales revisiting our example the global cell phone market penetration is often used to estimate whether cell phone producers can meet their earnings and revenue estimates if the market is considered saturated it means that existing companies have the vast majority of the market share leaving little room for new sales growth a key component of market penetration is quantifying a company s market penetration this is done by calculating a firm s market penetration rate discussed below a market penetration rate is simply a ratio that compares a company s performance against the total market the market penetration rate is especially important because it allows companies to compare where they are currently where they have been where they want to be and how their competitors are performing the market penetration rate allows a company to set a smart goal that can be calculated and tracked over time 