How to calculate Category Penetration and Brand Penetration

We come across multiple terms when it comes to Penetration: Household Penetration, Market Penetration, Category penetration and Brand Penetration. And understandably, some of us might find it a little confusing to differentiate. I will try and explain these metrics (with some examples, of  course).

Market Penetration / Household Penetration

Market Penetration of a particular product is defined as a measure of its sales (or adoption) when compared to the total relevant market for the product.

Market Penetration = # of Households buying a brand / Total # of Households

An article I came across at Bain Insights, indicates that household penetration is the biggest contributor to brand growth. A little dated article, but an interesting read none the less.

Category Penetration

Category penetration indicates how well a category is performing when compared to other categories. Since each category has a different purchase cycle, the time duration considered to calculate Category Penetration can differ. It can range from a week, a quarter, half-a-year or to a year.

Let us try to understand this with an example. We want to find out what is the customer penetration of biscuits in a given store. We have data for Biscuit shoppers and Total shoppers for the last 6 months.

	Biscuit Shoppers	Total Shoppers	Category Penetration
01/08/2015	61,306	95,628	64%
01/09/2015	56,671	90,452	63%
01/10/2015	46,040	77,414	59%
01/11/2015	36,395	79,798	46%
01/12/2015	51,975	107,579	48%
01/01/2016	55,592	103,930	53%

Category Penetration = # of Shoppers buying Biscuits / Total Shoppers of the store

(Also known as Customer Penetration in a Category)

This indicates that Biscuit is a fairly popular product with around 56% customer penetration 

Brand Penetration

Brand penetration is defined as how well a brand is performing within a category when compared with other brands in the same category. Category penetration & Brand penetration, together, can help identify brands that may not be doing well within a popular category.

Continuing with our above example, let us see the brand penetration of the Munch-On brand of biscuits.

	Biscuit Shoppers	Munch-On Shoppers	Munch-On Penetration
01/08/2015	61,306	314	1%
01/09/2015	56,671	2,509	4%
01/10/2015	46,040	2,393	5%
01/11/2015	36,395	2,330	6%
01/12/2015	51,975	4,649	9%
01/01/2016	55,592	5,476	10%

Brand Penetration = # of Shoppers buying a brand / # of Shoppers shopping in that category

(Also known as Customer Penetration in a Brand)

This shows that while people do mostly buy biscuits, Munch-On biscuits has a low brand penetration. It does have an interesting trend though with a gradual increasing customer penetration. There can be couple of reasons why there is low customer penetration for Munch-On biscuits in a fairly popular Biscuits category including poor placement or it being a recent launch.

I hope the above examples have helped you understand the concepts of Category Penetration and Brand Penetration.