Ansoff Matrix

The Ansoff product/ market matrix is a tool that helps businesses decides their product and market growth strategy.

It suggests that a business' attempts to grow depend on whether it markets new or existing products in new or existing markets.

It is used by marketers who have objectives for growth. Ansoff's matrix offers strategic choices to achieve the objectives. There are four main categories for selection.

ansoff matrix

The four main categories

Market Penetration (existing markets, existing products)

Here we market our existing products to our existing customers.

Market Development (new markets, existing products)

Here we market our existing product range in a new market.

This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of 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:

Product Development (existing markets, new products):

This is a new product to be marketed to our existing customers.

Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.

Business Diversification (new markets, new products):

This is where we market completely new products to new customers.
The diversification can be divided again into horizontal, vertical and lateral diversification.
Diversification is an inherently higher 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, it must have a clear idea about what it expects to gain from the strategy and a transparent and honest assessment of the risks.