Ansoff Matrix - Product Development & Market Growth Strategies

Tue, 07/01/2014 - 00:02 -- Gulzar Ahmed

The Ansoff Growth Matrix is a marketing planning tool which helps a company to determine its product and market growth strategy. Ansoff product/market growth matrix shows that growth of a particular company depend on whether it markets its new, innovative or existing products in new or existing markets. The output of Ansoff product / market matrix is a series of suggested growth strategies which set the direction for the business strategic planning.

Market penetration growth strategy

Market penetration is refers to a growth strategy where a company focuses on selling existing products into existing markets. By the help of market penetration growth strategy a company seeks to achieve four main objectives:

  1. Company wants to maintain or increase the market share of current products. A company can achieve this by a combination of competitive pricing strategies, sales promotion, advertising, and perhaps more resources dedicated to personal selling.
  2. Secure supremacy of growth markets
  3. Company wants to reorganize a mature market by driving out competitors. For this purpose company require a much more aggressive promotional campaign, supported by a suitable pricing strategy designed to make the market unattractive for competitor’s products.
  4. Increase the usage of a particular product or brand by existing customers for example by introducing loyalty schemes in the market.

ansoff matrix for product development & marketing growth strategies

A market penetration growth strategy is very much about “business as usual”. The company is focusing on markets and products it knows well. Company need to have good information about competitors and about customer needs. This strategy will require much investment in new market research.

Market development growth strategy

Market development refers to a growth strategy where the company seeks to sell/offer its existing products or services into new markets. In other words we can say this is a market expansion strategy for an existing product or brand.

The possible ways of approaching development growth strategy include:

  1. Find a new geographical markets for example exporting the company existing product to a new country
  2. New product dimensions or packaging for a product according to new market requirements
  3. Develop & organize new distribution channels for example a company who is selling its products or brand via retail can move on e-commerce and mail order etc.
  4. Make different pricing policies to attract more customers or to create new market segments

Market development is usually more risky strategy than market penetration because here company need to target new markets.

Product development growth strategy

Product development refers to a growth strategy where a company aims to introduce new or innovative products into existing markets. For this strategy a company may require the development of new competencies as well as to develop modified products which can appeal to existing markets. A company which wants to differentiate its product to remain competitive can use the strategy of product development.

Marketing emphasis of successful product development strategy is on:

  1. Research & development about the product and make innovation in products
  2. Company should have deep concern with customer needs, change in customer need and how company will satisfied their changing needs
  3. Being first to market (new product or modification)

Diversification growth strategy

In this type of strategy a company or a business usually introduces new products & brand in new market. There may be some sort of risk in diversification growth strategy because the business or company may have not such experience.

Before adopting the diversification growth strategy it is necessary for a company that it must have a clear idea which is being expected from this strategy. Risks should also be kept in mind before adopting this strategy.