The Ansoff Matrix Model

The Ansoff Matrix Model is a strategic tool that digital marketing analysts can use to
identify growth opportunities and the appropriate strategy to adopt for their company’s
products and services. It was developed by Igor Ansoff in 1957 and is widely used in
marketing and strategic management.

Here it is…

As you can see, the matrix focuses on two key factors—your company’s product(s) or
service(s) and the market your company operates in. Under these two factors there are four
growth strategies identified. Let’s look at each of them.

Market penetration
Market penetration focuses on increasing the sale of your current product(s) or service(s) in
an existing market. You’re aiming to get a larger share of the market by attracting new
customers or encouraging existing customers to buy more.

There are many strategies you can use to achieve market penetration including the following:
 • Price optimization: Drop your pricing to be more competitive or use discounts and
promotions to attract price-sensitive customers.
• Product bundling: Create bundles of your products or services and offer them at a
lower price than if they were purchased individually. This can encourage your
customers to buy more.
• Promotional campaigns: Use targeted marketing campaigns such as advertising,
social media, and email marketing to increase awareness of your product(s) and
service(s), and attract more customers from your market.
• Customer loyalty programs: Reward your existing customers for their loyalty. Offer
them discounts, exclusive access, or points-based systems to incentivize repeat
business.
• Improved customer experience: Lift the overall experience by providing excellent
customer service, streamline your processes, and improve the quality of your
product(s) or service(s). Happy customers often become repeat buyers.
• Competitive analysis: Study the competitors in your market to spot gaps or
weaknesses. Use what you learn to make your product(s) or service(s) stand out.
• Market research - Use surveys, interviews, and data analysis to better understand your
customers' needs, preferences, and pain points. Actively seek and listen to your
customers’ feedback. Enhance your market presence by addressing their concerns.
Use what you learn to continuously improve your product(s) or service(s).
• Strategic partnerships: Collaborate with complementary companies. You can cross-
promote each other's product(s) or service(s) and tap into each other's existing
customer bases.
• Innovative marketing: Use innovative marketing tactics like influencer marketing,
viral campaigns, and guerrilla marketing to create buzz and attract attention within
your market.
• Customer education: Tell your customers about the benefits and value of your
product(s) or service(s). You can use websites, product pages, blogs, articles, email
marketing, social media, infographics, short videos, tutorials, how-to guides,
webinars, live demonstrations, customer support, user manuals, customer reviews, and
testimonials.
• Sales team training: Invest in lifting the skills of your sales team. Give them the skills
and knowledge they need to boost your sales.
When considering a market penetration strategy, your analysis should include assessing
market saturation and competitive dynamics, and identifying opportunities to get a larger
slice of the market share.

Coca-Cola® is one of the world's most recognized and successful brands. It’s achieved
widespread market penetration through a combination of marketing strategies, product
development, distribution, and brand management. It invests heavily in building and
maintaining its brand. Its red and white logo, memorable slogans, and consistent messaging
have contributed to brand recognition and loyalty. It has a long history of creative and
impactful advertising campaigns.

Market development
Market development is entering new markets with your existing product(s) or service(s). The
aim is to expand your customer base by exploring new segments or geographic regions.

Common market development strategies include:

 • Geographic expansion: Enter a new geographic region, either domestically or
internationally. You could export directly or establish new relationships with
international distributors.
• Demographic expansion: Focus on specific demographic groups that haven't been
targeted before. This could be different age groups, income levels, or cultural
backgrounds.
• Franchising: Expanding through franchising can be an effective way to enter new
markets with lower risk. Your franchisees will invest their capital and manage day-to-
day operations.
• Strategic alliances: Collaborate with other businesses in related industries to enter
new markets. This can give you access to your partner’s customer base and expertise.
• Online marketplaces: Leverage online platforms and marketplaces to reach a wider
global audience.
• Brand localization: Adapt branding, marketing materials, and messaging to resonate
with the culture and values of new markets.
When you’re considering a market development strategy, you should complete research to
understand the potential new market's needs, preferences, and any barriers to entry. You may
need to adapt your marketing messages to appeal to different audiences.

Nike® puts a strong emphasis on international expansion. It has a global presence and has
expanded into many countries and regions around the world. Nike® entered these new
markets by opening retail stores, forming strategic partnerships with local distributors, and
leveraging e-commerce channels. This allowed it to tap into the purchasing power of
consumers in emerging economies and established markets.

Product development
Product development is introducing a new product or service into an existing market. Your
aim is to meet the evolving needs of your customers, improve your competitiveness, and
capitalize on market trends.

Common product development strategies include:

• Incremental innovation: This is making small, iterative improvements to your product

or service. This can help you keep a competitive edge and make sure your existing
customers stay satisfied. Some companies release updated versions or features of their
products regularly to respond to customer feedback and market trends.
• New product line extension: This is developing a new product that is related to your
existing product line based on an extended market assessment research (to understand
the existing offer and demand). It helps you to leverage your brand, distribution
channels, and customer base while meeting distinct customer needs. For example, a
car manufacturer might introduce a new line of electric vehicles.
• Disruptive innovation: This is creating an entirely new product or service using
innovation that challenges the existing market leaders. The aim is to create a new
niche or market segment, often by offering lower-cost alternatives or addressing
unmet customer needs.
• Open innovation: This is collaborating with external partners, such as suppliers,
customers, or researchers to develop new products. You can tap into their external
expertise and resources and accelerate your product development process.
If you’re considering product development, your analysis should include identifying
customer preferences, completing market research, and evaluating the potential demand and
feasibility of your new offerings.

Netflix® started as a DVD-by-mail rental service and then transitioned into online streaming
in 2007. This revolutionized the entertainment industry and popularized the concept of binge-
watching. It led to significant changes in how people consume television and movies.

Diversification
Diversification is entering a new market with a new product or service that is different from
your company's existing offerings. This helps you to spread the risk by reducing your reliance
on a single market or product.

Common product diversification strategies include:

• Related diversification: This is expanding into products or markets that are related to
your existing business. You can leverage your core competencies, technologies, and
distribution channels. Apple used this approach when it moved from computers to
mobile devices and tablets.
• Unrelated diversification: This is entering entirely new markets or industries that
have no direct connection to your products or services. The aim is to spread risk
across different industries and capitalize on high-growth opportunities. Virgin used
this approach when it moved from being a music record retailer to unrelated
industries, including airlines (Virgin Atlantic), mobile phones (Virgin Mobile), and
health care (Virgin Care).
• Vertical diversification: This is moving into different stages of the supply chain. You
can diversify upstream or downstream. Amazon, which began as an online bookstore,
used this approach when it diversified downstream by creating readers, like the
Kindle, and diversified upstream by using fulfillment centers to give it control over
the distribution and delivery of its products.
When you’re considering a diversification strategy, you should complete thorough market
research and feasibility analysis to assess the attractiveness and fit of the new product market
combinations. You may think about entering unrelated industries, acquiring or partnering
with existing companies, or launching a new venture.

One of the most successful examples of diversification is The Walt Disney Company®.
Founded as an animation studio, Disney® has grown into a global entertainment
conglomerate that includes theme parks, television networks, strategic acquisitions (e.g.,
Pixar, Marvel, and Lucasfilm), streaming services, consumer products (e.g., toys, clothes and
merchandise, and publishing).

Using the Ansoff Matrix

When using the Ansoff Matrix and its growth strategies, you should:

1. Complete market analysis and research to identify growth opportunities.

2. Assess your company's capabilities and resources to pursue the different growth
strategies.
 3. Evaluate the risks, potential returns, and resource requirements for each strategy.
4. Collaborate with cross-functional teams to develop and execute the growth initiatives.
5. Monitor and measure the results of implemented strategies and make adjustments as
needed.
The Ansoff Matrix is a valuable framework for identifying growth options and guiding your
strategic decision-making. You can use it to expand your market presence and increase
competitiveness.