If you’re among the many companies we are working with that are bringing new products to market, it is important to create a traget penetration metric.  Many companies have metrics around demand generation but still struggle with product strategy and planning and new product measures and metrics. Metrics around product and portfolio management typically address questions such as:

1. What volumes can we expect from a new product?
2. How will sales of existing products be affected by the launch of a new offering?
3. Is brand equity going to increase or decrease as a result of the new offer/product?

Let’s start with explaining how trial and repeat rates are determined and used to generate sales forecasts.

Use Trial & Repeat Rates to Create the Model

Trial and repeat rates are two areas where the Marketing organization, specifically the product marketing function, can affect the success of a new product. As a result, it is a good idea to use both of these for establishing your Marketing metrics and performance targets. Both can serve as as indicators for determining whether new product target penetration targets will be achieved.

Trial and repeat calculations are often used to anticipate sales in future periods for new products. The foundation for this approach is that everyone buying the product will either be a new customer, whom we will call a trier, or a repeat customer. By adding new and repeat customers in any period, we can establish the penetration of a product. By using test market results, you can develop a model for making volume projections and establishing a target penetration metric.

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Here’s what you will need to create the model.

1. Trial population is the target population multiplied by the adjusted trial rate.
   • Adjusted trial rate is the trial rate multiplied by the awareness rate multiplied by the ACV %.
   • ACV or PCV is the commodity or product volume.
2. Trial rate % is the percentage of a defined population that purchases or uses the product for the fist time in a given period. You can derive this number by dividing first-time triers in period t by the total population.
3. First-time triers in period t. This is the number of customers who purchase or use a product or brand for the first time in a give period. We are calling this time period, t.
4. A repeat buyer is calculated by multiplying the trial population by the repeat rate.

From this information you can establish a target penetration metric and define your key performance indicators from the information above. The following equation will help you create the penetration target.

Penetration t = the actual number of “customers”, “subscribers,” etc. in a specific the time period t multiplied by the repeat rate plus the number of first time triers in time period t.

Use Your Traget Penetration Metric to Project Sales

Once you have this data you are just a step away from projecting sales. Projection of sales is calculated by multiplying the penetration t by average frequency of purchase by average units of purchase.

You now have two viable measures you that relate to product penetration. Need more help or want to expand your measures and metrics capabilities, let’s talk.

FAQ:

• Expected sales volumes for the new product
• Impact on existing product sales
• Effect on overall brand equity

• Trial Rate: Percentage of the target population purchasing/using the product for the first time in a given period.
• Repeat Rate: Proportion of first-time triers who make subsequent purchases.
• By modeling both, you can estimate total penetration and future sales volumes.

• Target population size
• Awareness rate
• Adjusted trial rate
• ACV/PCV (commodity/product volume)
• First-time triers and repeat rates
• Average purchase frequency and units

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