The Ansoff Matrix is a growth strategy that Russian American Igor Ansoff created. Ansoff Matrix is a product-market strategy.
The Ansoff Matrix or Growth Matrix is used in marketing. It is simple but very effective in growing your business.
Here are the four marketing strategies in the Ansoff Matrix:
- Market Penetration
If you are in an existing market and currently the users of your product are around 20% you need to sell and distribute more in order to increase the users or number of your customers.
In other words, market penetration is increasing your market share in the market where you operate.
You can achieve it by lowering your price to generate new users.
You can also increase your promotion and distribution to reach those that you have not yet reached.
Market Penetration is the basic strategy that we use in growing our business. It is also the least risky among the 4 strategies in Ansoff Matrix.
2. Market Development
If you are currently offering your products in Pasig City and you want to offer it to Mandaluyong City, this is called Market Development Strategy.
In Market Development Strategy, you expand your business by tapping new markets (Geographic, Demographic, etc.) offering the same products that you have.
You can also implement this by offering to a new market segment like from male-only product to including female as a new user of your product. It can also be from kids to including adults as your new users.
One example is Milo that now offers Milo for Adults. It used to be targeting kids only.
3. Product Development
Some companies use product development to achieve growth.
They create new products or extend their product line. These two are basic product development strategies that entrepreneurs can use when pursuing growth.
New products provide sales contribution that is not possible with your current products. Consumers expect novelty and when you earn their trust, they are looking forward to your new offerings.
Diversification is a strategy where you create a new product and offer it to a new market.
It is the riskiest growth strategy among the four strategies in the Ansoff Matrix.
You can see Diversification being used by bigger companies or conglomerates.
The more they diversify the more the risk is lowered. This strategy is related to the saying, “ Do not put all your eggs into one basket.”
These four growth strategies will help small businesses craft a better direction to their companies. If your company is one of it, then it is better for you to master the Ansoff Matrix.
A caveat is that you should use these strategies with consideration to understanding your competitors and customers.