Ansoff’s Product Market Growth Matrix

Ansoff’s Product Market Growth Matrix

We plot product on X axis and market on Y axis .Product has two column existing product and new product and market has two row existing market and new market.

The Ansoff’s product market growth matrix proposed by Igor Ansoff. It is a useful tool that helps businesses decides their product and market growth strategy. With the use of this matrix a business can change to fair idea about how its growth depends upon its markets in new or existing products in both new and existing markets. Companies should always be looking to the future. One useful device for identifying growth opportunities for the future is the product market expansion grid. The product market growth matrix is a portfolio-planning too in identifying growth opportunities for the company.

There are following four strategies is found in product market growth matrix :

1. Market Penetration: Market penetration refers to a growth strategy where the business focuses on selling existing products into existing markets. Penetration might require greater spending on advertising or personal selling. Overcoming competition in a mature market requires an aggressive promotional campaign, supported by a pricing strategy, designed to make the market unattractive for competitors.

There are three methods of penetration strategy:

1. Attracting competitor’s customers.
2. Selling more to the existing customers without changing the product in the major way. It is achieved by making more sales to present customers without changing products in any major way. Penetration is also done by effort on increasing usage by existing customers.
3. Attracting non-users of the products.            

2. Market Development: Market development refers to a growth strategy where the business seeks to sell its existing products in to new markets. It is a strategy for company growth by identifying and developing new markets for current company products. This strategy may be achieved through new geographical markets, new product dimensions or packaging, new distribution channel of different pricing policies to attract different customers or create new market segments.
3. Product Development: Product development refers to a growth strategy where business aims to introduce new products into existing markets. It is a strategy for company growth by offering modified or new products to current markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.
4. Diversification: Diversification refers to a growth strategy where a business markets new products in new markets. It is a strategy by starting up or acquiring businesses outside the company’s current products and markets. This strategy is risky because it does not rely on either the company’s successful product or its position in established markets. Typically the business is moving into markets in which it has little or no experience.

As market conditions change overtime, a company may shift its product-market growth strategies. For example, when its present market is fully saturated a company may have no choice other than to pursue new market.