Ansoffs Matrix By Sahal Iqbal WHAT IS IT

Ansoff’s Matrix By Sahal Iqbal

WHAT IS IT? It was created by A Russian American called Igor Ansoff. The Ansoff Growth matrix is a marketing planning tool that helps a business determine its product and market growth strategy. 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.

MARKET PENETRATION Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Seeks to achieve four main objectives: 1) 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 2) Secure dominance of growth markets 3) 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 4) 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: 1) New geographical markets; for example exporting the product to a new country 2) New product dimensions or packaging: for example 3) New distribution channels (e. g. moving from selling via retail to selling using ecommerce and mail order) 4) 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: 1) Research & development and innovation 2) 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 the most risky 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.

HOW DO BUSINESES USE IT? As mentioned above, the Ansoff Matrix is used by decision-makers to essentially manage the scope of the corporation’s portfolio. Managers and executives need to decide which of the possible four strategies is more beneficial and potentially less risky for their business or corporation. Since the market is one of the two variables that comprise the Ansoff Matrix, the tool has been commonly defined as a marketing planning tool. However, it is mainly used on a corporate strategy level, rather than within the marketing department of a business. That’s because growth decisions have a long-term impact on the whole corporation and require an allencompassing analysis of the corporation’s portfolio scope before being taken.

HOW CAN IT BE USED TO DEVELOP A MARKETING STRATEGY? The lowest risk strategy is termed ‘Market Penetration’. This is only possible where markets are still growing, or where organisations are prepared to use other elements of the marketing mix (such as price discounting and additional promotional activity) to penetrate the market at the expense of competitors. The second strategic option in the Ansoff Matrix is to develop new products for existing markets (customers), through a ‘Product Development’ strategy. Here the ‘Product’ and ‘Promotion’ elements of the marketing mix will change (as a minimum), so the risk is higher than market penetration. The third strategic option involves taking existing products into new markets using a ‘Market Development’ strategy. This is also considered to be risker than market penetration as it can be difficult to understand the complexities of new markets. Key changes in the marketing mix are likely to be ‘Place’, with consideration of new channels and routes to market, as well as ‘Promotion’, through promoting to new target segments. The final strategy in the Ansoff Matrix is ‘Diversification’, which is developing new products for new markets. This is seen as the riskiest strategy of all four, as the organisation is moving into an unfamiliar market. However, this risk can be mitigated by undertaking ‘related’ diversification and it could have the potential to gain the highest returns.

HOW COCA-COLA CAN MAKE USE OF ANSOFF’S MATRIX IN THE DEVELOPMENT OF THEIR MARKETING STRATEGY The Coca-Cola company is the world’s leading and best known drinks supplier. Its mission statement is: “The Coca-Cola Company exists to benefit and refresh everyone who is touched by our business. ” The company has a portfolio of products, these are at different stages in the product life cycle. The aim of Coca-Cola is to ensure the product range offers something for every occasion and every individual. When developing new products, firms such as Coca-Cola must consider how the new products fit with the existing ones. Existing Products • • Existing Markets New Markets • New Products • • Coca Cola Diet Coke Coca-Cola Share Size Vanilla Coke Cherry Coke • Lime Coke • SMART Water • Winnie the Pooh Roo Juice • Powerade

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