Setting Penetration Targets for your brand for 2025

Having read the recent study highlighted by the wonderful Applied Brand Science that again underlines the fact that penetration is by far the most important metric for brand growth, the obvious question for any brand owners is how exactly can I do that?

Below I have outlined the path to target setting we suggest for digital brands and the logic behind them.

Byron Sharp's How Brands Grow primarily outlines empirical laws of growth rather than prescriptive models, but it definitely provides several key insights that can guide penetration growth expectations.

As we know, Sharp emphasises the importance of increasing mental and physical availability to drive growth and suggests that the majority of a brand's growth comes from increasing penetration (not loyalty).

While the EBI does not provide specific formulas to project growth, studies and analyses based on his principles often highlight benchmarking against category norms and the double jeopardy law. So how can we use these to help us identify targets?

Category Benchmarks and Market Size:

• Compare your brand's penetration to competitors within the category. Make sure you are looking at the right time period to measure against - this should be based on the typical category interpurchase cycle.
• Brands typically follow a log-normal distribution where smaller brands grow at a slower rate due to their lesser availability and salience.

S-Curve of Penetration:

• New brands or smaller brands (<10% penetration) can grow penetration faster compared to established brands.
• The penetration growth curve slows as a brand approaches the category ceiling (which is typically defined by the penetration of the category leader).
• Understand where your brand is on this curve - and how that has moved in the last 12 months

Double Jeopardy Effect:

• Smaller brands not only have fewer buyers but also less frequent buyers. Growth requires converting non-buyers and increasing lighter buyers’ frequency.
• Growth targets should reflect incremental penetration increases achievable via competitive gains or market expansion.

A Practical Example of Growth Modelling:

Using an example of a fictitious Digital brand, if that brand currently has 6% market penetration in a category where the market leader has 30% penetration, what would be a realistic target for penetration growth in 2025?

1. Define the Category Ceiling:

If the category leader has 30% penetration and the top five brands collectively represent 60%, then your target might logically aim for incremental growth toward mid-tier brand levels (e.g., 8%-10%) over the next period.

2. Expected Growth Rate:

Studies suggest that small brands aiming to double penetration often need 2-4 years, depending on investment in reach and distribution. A realistic short-term target might be a 10%-20% increase in penetration over 12 months, i.e., growing from 6% to ~7%-7.2%.

3. Logarithmic Benchmarking:

Growth slows as penetration rises; thus, moving from 6% to 7% is relatively easier than moving from 20% to 21%. Your long-term goal should align with the penetration norms for brands of your size and investment level in the category.

Next Steps:

1. Benchmark Your Market:

Study the penetration of competitors within your category. Tools like Kantar or Nielsen datasets, or Telecom-based data like Eureka AI’s, can identify the penetration ceiling.

1. Factor in Availability:

Invest in increasing availability (physical and digital). Sharp suggests that penetration growth correlates heavily with distribution and advertising reach.

1. Leverage Data Modelling:

Use your market penetration data alongside growth trends (e.g., from past campaigns or category benchmarks) to simulate realistic growth trajectories.

Relevant Studies and Insights:

Several studies expand on Byron Sharp’s principles:

1. Dirichlet Models:
2. Kantar and Nielsen Analyses:
3. Ehrenberg-Bass Institute Research: