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Ansoff Matrix: Market Penetration

The Ansoff Matrix suggests that a business' growth strategies depend on whether they market new or existing products in new or existing markets. The four strategies are: 1) Market penetration, focusing on existing products in existing markets through competitive pricing, advertising, and loyalty programs. 2) Market development, selling existing products into new markets through new geographies, packaging/dimensions, distribution channels, or pricing. 3) Product development, introducing new products into existing markets which may require new competencies and modified products. 4) Diversification, marketing new products in new markets, which is inherently risky without experience in those new markets but can be highly rewarding.

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253 views

Ansoff Matrix: Market Penetration

The Ansoff Matrix suggests that a business' growth strategies depend on whether they market new or existing products in new or existing markets. The four strategies are: 1) Market penetration, focusing on existing products in existing markets through competitive pricing, advertising, and loyalty programs. 2) Market development, selling existing products into new markets through new geographies, packaging/dimensions, distribution channels, or pricing. 3) Product development, introducing new products into existing markets which may require new competencies and modified products. 4) Diversification, marketing new products in new markets, which is inherently risky without experience in those new markets but can be highly rewarding.

Uploaded by

Gift
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Business Strategy: Explaining the Ansoff Matrix

Ansoff Matrix

Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on
whether it markets new or existing products in new or existing markets. The output from the
Ansoff product/market matrix is a series of suggested growth strategies which set the direction
for the business strategy. These are described below:

Market penetration

Market penetration is the name given to a growth strategy where the business focuses on selling
existing products into existing markets.

Market penetration seeks to achieve four main objectives:

 Maintain or increase the market share of current products – this can be achieved
by a combination of competitive pricing strategies, advertising, sales promotion
and perhaps more resources dedicated to personal selling
 Secure dominance of growth markets
 Restructure a mature market by driving out competitors; this would require a
much more aggressive promotional campaign, supported by a pricing strategy
designed to make the market unattractive for competitors
 Increase usage by existing customers – for example by introducing loyalty
schemes
A market penetration marketing strategy is very much about “business as usual”. The business is
focusing on markets and products it knows well. It is likely to have good information on
competitors and on customer needs. It is unlikely, therefore, that this strategy will require much
investment in new market research.

Market development

Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets.

There are many possible ways of approaching this strategy, including:

 New geographical markets; for example exporting the product to a new country
 New product dimensions or packaging: for example
 New distribution channels (e.g. moving from selling via retail to selling using e-
commerce and mail order)
 Different pricing policies to attract different customers or create new market
segments

Market development is a more risky strategy than market penetration because of the targeting of
new markets.

Product development

Product development is the name given to a growth strategy where a business aims to introduce
new products into existing markets. This strategy may require the development of new
competencies and requires the business to develop modified products which can appeal to
existing markets.

A strategy of product development is particularly suitable for a business where the product needs
to be differentiated in order to remain competitive. A successful product development strategy
places the marketing emphasis on:

 Research & development and innovation


 Detailed insights into customer needs (and how they change)
 Being first to market

Diversification

Diversification is the name given to the growth strategy where a business markets new products
in new markets.

This is an inherently more risk strategy because the business is moving into markets in which it
has little or no experience.
For a business to adopt a diversification strategy, therefore, it must have a clear idea about what
it expects to gain from the strategy and an honest assessment of the risks. However, for the right
balance between risk and reward, a marketing strategy of diversification can be highly
rewarding.

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