New leads are the lifeblood of most successful companies. Even when sales perform well and the business is running smoothly, most marketing functions still need new ways to increase their lead pipeline, grow market share, boost brand awareness and drive their business forward. Without continual growth, companies can quickly stagnate. If this happens, businesses can become more vulnerable to aggressive competitors and could soon find their customer base dwindling.
One of the best ways a company can ensure they are developing the right growth strategies for their market and their business is to apply Ansoff’s Matrix to their business plan. Tried and tested, this simple but powerful strategy tool will help marketing decision makers map the growth options an organisation might choose between.
What is Ansoff’s Matrix?
Focusing on the key criteria of ‘who should we sell to’ and ‘what product should we sell’, Ansoff’s Matrix combines four broad product/market strategies – existing products, new products, existing markets and new markets. This provides four possible product-market combinations that can be applied to a business plan to create continued growth. Used by companies and strategists around the world, the Matrix is an extremely effective and useful business tool despite its simplicity.
The first quadrant of Ansoff’s Matrix emphasises stability and low risk, combining existing products with existing markets. Known as market penetration, it’s this strategy by which a company increases its sales and its market share through selling more of its current products and services to new customers in its existing market. That could be by looking at its customer base and selling to similar new ones, by offering special upsell and cross-sell packages, or increasing promotion. Growing markets, such as B2B pharma, medical instrumentation and financial services often attract the market penetration strategy.
Market development is the second quadrant of the Ansoff Matrix. The idea by which companies sell their existing products or services to new markets or a new type of customer. Market development is accomplished by promoting existing products or services to a new audience through carefully segmenting, targeting and positioning the product or service. Often, telemarketing is then used to communicate and engage the right buyers, with a view to building a strong relationship.
Product development creates new products and services to supersede or enhance existing ones. By anticipating changes in customer needs and developing products that meet those needs, companies use innovation to increase the spend of existing customers. A product development strategy aims to use existing capabilities to offer something new to established clients, increasing a company’s growth in the process.
Lastly, when companies look for new products and new markets, the Matrix identifies it as diversification. This can help a company to survive difficult economic periods or focus their brand in a different direction. One of the most challenging strategies, diversification is usually only attempted when a business has a good understanding of their target industry and their target audience, or has a brand that can adapt and lend its weight to lots of new apparently unrelated markets. One of the most famous being Richard Branson’s Virgin brand, which operates in many different markets and lots of different customer types.
Ansoff’s Matrix has also been successfully used for simply identifying and responding to how risky a particular strategy might be.
Market Penetration Strategy – same product same market – has a low risk because the customer and the product are already understood.
Market Development Strategy – same product new market – has a medium risk because of the need to appeal to new markets or unknown customers.
Product Development Strategy – new product same market – has higher risk because it is very costly to develop and launch new products, plus new product failure rates can be high.
Diversification Strategy – new product new markets – has highest risk because neither market nor product is well defined at the outset, consequently investment is required for both.
By using the principles of intelligent telemarketing, Blue Donkey will help client partners build the insights they need to grow and adapt. To find out more about our targeted strategies, take a look around our website or speak to a member of our team.
Ansoff, I. (1957) ‘Strategies for diversification’, Harvard Business Review, vol. 35, issue 5 September–October, pp. 113–24.