Simple marketing models to help you develop winning strategies – Part 3: Ansoff’s Matrix

How the Ansoff’s Matrix marketing model works.

Strategic marketing models can be useful tools in helping companies work out the most effective marketing strategies and campaign plans to undertake. 

Models such as Ansoff’s Matrix support brands when developing their strategies for growth. This model is different from the PESTLIED and SWOT models in that it also analyses the risks associated with each of the strategies it offers.

How can you use strategic marketing models?  

As we have covered in previous editions in this three-article series, the function of a marketing model is not   to do the thinking for you. Most of the information that will be used when approaching a marketing model will already be known to you and your team. And it will be unique to your brand. Instead, view these marketing models as frameworks you can use for ordering ideas and sharing plans. But remember that the GIGO principle applies – feed them garbage in, and garbage out is what you’ll get.

What is Ansoff’s Matrix?

Ansoff’s Matrix – also known as Ansoff’s box – was created by Igor Ansoff in 1957 and is a model used by companies to analyse and plan their strategies for growth. The model asks you questions and helps focus your thinking on the four principal routes to growing your brand or business. 

In addition, Ansoff’s Matrix also helps you better understand risk, providing you with a framework for weighing up potential strategy success alongside potential downfall.

How does Ansoff’s Matrix work?

Ansoff’s Matrix uses a grid framework – see above – made of four clear quadrants that represent your potential growth strategies – ‘market penetration’; ‘market development’; ‘product development’; and ‘diversification’.

The growth routes are considered from the market and the product perspectives. As we ascend the grid, these two distinct areas begin to see greater overlap, with the fourth quadrant – diversification – offering a strategy focussed on developing both the market and the product simultaneously.

But with greater overlap and diversification comes greater risk. Ansoff’s model highlights that as your brand explores new products and markets – and the more overlap your strategy has between the two – the more vulnerable it becomes and the greater the risk. 

Here’s how it works in detail:

Market Penetration strategy

‘Market penetration strategy’ is when you focus on greater market share within your existing market with your existing products or services. This means working with what you have already rather than attempting to create or engage with anything new – doing more of the same.

One way that a company might do this could include increasing marketing investment, or discounting – or both – to take market share from competitors. This could result in lower margins over the short-term before market share grows but it is a relatively low risk strategy.

Market Development Strategy

‘Market development strategy’ means focussing on exploring new markets with your existing products and solutions. It is a growth strategy that introduces your existing product or solution to new audiences. You could do this by expanding your B2B offering into B2C, if appropriate. Or expanding into new regions.

For example, an organisation selling fire detectors into the commercial and industrial property market could consider marketing their products to the high street consumer. While the product does not change, they are able to reach a previously untapped audience.

Product Development Strategy

‘Product development strategy’ is a growth strategy tool for helping you improve or create products to serve an existing market. You could do this by investing in research to develop a new product. Or acquiring a competitor’s product and buying the rights to sell it. 

For the organisation selling fire detectors, they could decide to redesign their product to do the same job in a more compact design. This time the product, as opposed to the market, would see development, and the existing consumer would continue to be successfully targeted. 

Diversification

The final strategy in the Ansoff model is ‘diversification’ . This involves your brand developing new products or services to sell in new markets. In doing so, there are two routes you could take: ‘related diversification’ or ‘unrelated diversification’.

1. ‘Related diversification’ means that despite the new product and new market, your organisation will stay within the same industry that you are familiar with.  
2. ‘Unrelated diversification’ means engaging with an industry that your brand potentially has no experience in.     

The more new avenues you decide to pursue – in relation to product or consumer – the more risk you expose your brand to. So by relying on development to both the market and the product, diversification strategy is the riskiest of all the strategies.  

How should you approach a marketing model?

As with every marketing model, Ansoff’s Matrix has its limitations if viewed in isolation. It doesn’t, for example, encourage you to account for the work of competitors or other external forces. This is where a model like PESTLIED would be useful to your brand. Neither does Ansoff’s Matrix provide opportunities for nuances besides its basic guidance on strategy risk. In this case, a model like SWOT would strengthen your analysis of your own capabilities as a company.

For you to achieve the most insight into how to grow your marketing strategy, the three models in this series – PESTLIED, SWOT and Ansoff’s Matrix – should be used side by side. 

If you would like support with developing marketing strategy and campaign plans, contact us today. We are always happy to meet face-to-face or digitally to discuss how we can support your growth.

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