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The Ansoff Matrix – a strategic marketing planning tool that can help your business avoid a wrong turn

What actually is the Ansoff matrix – and why should I use it for my marketing plan?

In this series of articles, I take a look at an easy-to-use strategic marketing planning tool. Known as the Ansoff Matrix, the enduring popularity of it is probably down to its simplicity. In short, it  says a business has only four possible strategic choices – depending on whether you choose to market new or existing products in new or existing markets.

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‘Where to play and how to win’ is a great phrase summarising the benefits of using it. In these articles I have provided examples to make particular points and help develop your understanding of it, and how you can apply it to your business when planning its strategic direction.

The Ansoff Matrix is a proven strategic planning tool that has been around since the 1950’s to help businesses identify potential new markets and new products – and therefore product development opportunities.

First things first, there are criticisms of it – such as that it ignores competition as a factor when deciding your possible strategy. But overall, by keeping it simple and using the structure it offers with your own industry knowledge, it provides a good starting point for identifying and categorising commercial opportunities – especially when combined with some other marketing planning tools – such as the ‘SWOT analysis’ that you may well have heard of. 

Before starting to consider the Ansoff Matrix and the current situation for your business, you need to put things in context and think about issues such as –

  • The main industry sectors your business is currently in
  • The buying process in each of your markets
  • Trends in other geographic markets, e.g. the US market is often further ahead than the UK
  • Are you actually looking to develop new products or services?
  • Your current marketing activities – business development and your online presence

The Ansoff matrix itself suggests that a business’s attempts to grow depend on whether it markets new or existing products in new or existing markets.  The diagram below shows a number of different strategies – from simple price changes to a global brand moving into a new geographic market.

A marketing plan can help avoid your business taking a wrong turn

In the next four articles, I’m going to take each of  in turn, give a further explanation and give examples to show how used in practice including some questions for your business.

  1. Market penetration is a growth strategy where the business focuses on selling existing products into existing markets. It is very much about ‘business as usual’…
  2. Market development is where the business seeks to sell its existing products into new markets, shown here in the bottom left quarter…
  3. Product development is where a business aims to introduce new products into an existing market. This strategy may require new competencies and modified existing products in order to appeal to that existing market sector.
  4. Diversification – this is inherently a riskier strategy (but also with potentially greater rewards) because the business is moving into a market in which it has little or no experience.

Next time I take a close look at the first of these strategies – market penetration

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Click here to read – Getting started – developing your business strategy with an easy-to-use marketing planning tool.

For a free, no-obligation 30-minute chat about marketing your business in 2021, please get in touch. Click here to request the complete series of 6 strategic marketing planning articles.

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Common sense is as rare as genius

Ralph Waldo Emerson