The Ansoff Matrix

The Ansoff Growth matrix is a marketing planning tool that helps a business determine its product and market growth strategy.

   Sometimes the Ansoff Growth matrix is also called the Product/Market Expansion Grid, the following matrix shows four ways that business can grow,and helps people think about the risks associated with each option.

- Market Penetration – selling more of the same things to more of the same customers

- Market Development – selling more of the same things to different customers

- Product Development – selling new products or services to the same customers

- Diversification – selling new products or services to different customers

Using Ansoff’s matrix, business owners can evaluate each of the growth strategies in turn to assess which is likely to result in the best possible return.

Penetration:

Markers usually adopt penetration strategy when they make efforts to sell the existing product to the existing customers. It can be achieved by adjusting pricing, by adding novel and improved features, changing the packaging (shampoo sachets), or highlight alternative usages. For example, Cadbury India is pushing for chocolates to be used as small gifts instead of more traditional sweets used during Diwali festival.

Product Development:

Nowadays more and more people have become well aware of the safety and health problems caused by food. It really pushed McDonalds to introduce healthier food like salads in their outlets in order to retain its existing customers. As we all know, salads are exactly opposite of what McDonald’s is famous for! However, public regulatory pressures, changing consumer behavior, and negative media coverage pushed them to bring in healthier choices on the menu.

Market Development:

   One of the most used strategies to obtain maximum benefit of an excellent and successful product is to introduce this existing product into different markets. Probably it will take the approach of entering various national and international geographical areas. From my perspective, Apple's introduction of iPod Touch falls into the same category. iPod Touch was actually a replica of iPhone except that it couldn't make calls. iPod Touch was basically another iPhone without the contract with AT&T. However, it just helped Apple open up a tremendous market.

  Diversification:

  When marketers want to introduce a totally new product to a completely new market, they engage in diversification. In my opinion, iPod was perhaps one of the most successful diversification ever. With its launch Apple made a target on a very large customer group, very different from its traditional smaller cult-like followers. Apple also entered into the music business that was completely new for the company. Steve Jobs and his team made a tremendous effort in creating contracts with music labels and artists.

    The advantage of Ansoff’s Matrix is that it helps business owners to analyse the potential for each of the growth strategies. A business which operates in an expanding market could grow through market penetration. However, a business in a mature, stable market may choose to grow either through market development or product development depending on its internal strengths. If neither of these offers sufficient potential, a business may consider diversification to achieve further growth.