About the Ansoff Matrix
It is used by marketers who have objectives for growth. Igor Ansoff's matrix offers strategic choices to achieve the objectives. There are four main categories for selection.
- Market Penetration
- Market Development
- Product Development
- Business Diversification
The four main categories
Market Penetration (existing markets, existing products):
Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.
Market penetration seeks to achieve four main objectives:
- Maintain or increase the market share of current products - this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling
- Secure dominance of growth markets
- Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
- Increase usage by existing customers. For example by introducing loyalty schemes.
A market penetration marketing strategy is very much about "business as usual". The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.
Market Development (new markets, existing products):
Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development.
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.
There are many possible ways of approaching this strategy, including:
- New geographical markets; for example exporting the product to a new country
- New product dimensions or packaging: for example
- New distribution channels
- Different pricing policies to attract different customers or create new market segments
Product Development (existing markets, new products):
This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.
Business Diversification (new markets, new products):
This is where we market completely new products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that we remain in a market or industry with which we are familiar.
The diversification can be divided again into horizontal, vertical and lateral diversification.
- The horizontal diversification is the extension of the production programme.
- The vertical diversification is the sales stage stored by products pre order.
- The lateral diversification is the sales of completely new products, which within the range of the technology and marketing in no connection.
Diversification is an inherently higher risk strategy because the business is moving into markets in which it has little or no experience.
For a business to adopt a diversification strategy, it must have a clear idea about what it expects to gain from the strategy and a transparent and honest assessment of the risks.
Market Development
Here, you’re targeting new markets, or new areas of the market. You’re trying to sell more of the same things to different people. Here you might:
· Target different geographical markets at home or abroad
· Use different sales channels, such as online or direct sales if you are currently selling through the trade
· Target different groups of people, perhaps different age groups, genders or demographic profiles from your normal customers.
Diversification
This strategy is risky: There’s often little scope for using existing expertise or achieving economies of scale, because you are trying to sell completely different products or services to different customers
Its main advantage is that, if one business suffers from adverse circumstances, the other is unlikely to be affected.
Market Penetration
With this approach, you’re trying to sell more of the same things to the same people. Here you might:
· Advertise, to encourage more people within your existing market to choose your product, or to use more of it
· Introduce a loyalty scheme
· Launch price or other special offer promotions
· Increase your sales force activities, or
· Buy a competitor company (particularly in mature markets)
Product Development
Here, you’re selling more things to the same people. Here you might:
· Extend your product by producing different variants, or packaging existing products it in new ways
· Develop related products or services (for example, a domestic plumbing company might add a tiling service – after all, if they’re plumbing in a new kitchen, most likely tiling will be needed!)
· In a service industry, increase your time to market, customer service levels, or quality.
