What is the Ansoff Growth Matrix?
The Ansoff Growth Matrix or Ansoff Matrix is a tool composed of four different business-growing strategies. It outlines different ideas and methods to grow your business and market presence based on what risk level you are comfortable with.
What are the 4 Strategies of the Ansoff Growth Matrix?
Created by H. Igor Ansoff and published in the Harvard Business Review in 1957 for an article called “Strategies for Diversification,” the Ansoff Growth Matrix aims to help businesses discover the right way for them to grow and diversify their operations. It consists of four strategies that range from least to most risky to execute, each with different factors considered.
The four Ansoff Matrix Growth strategies are the following:
Market Penetration
This is the safest and least risky option for business growth since this involves only expanding product sales and profit in your existing market. With this strategy, little to no surprises await you, as you are already in familiar territory and will not be developing anything new. Common ways to deepen and expand your presence in your market include:
- Price adjustments
- New promotion styles
- Improving customer relationships
- Continuously improving existing products
Product Development
This strategy is considered slightly riskier than Market Penetration. Under this portion of the Ansoff Growth Matrix, you will need to develop and introduce a new product to your existing market. This will involve extensive research, testing, and refining.
Market Development
Compared to Product Development, where you develop new products and offers for your existing market, this strategy involves sharing your existing product with an entirely new market instead. This can be done by discovering or developing new uses for your existing products to cater to a different market or niche or creating different marketing strategies for them based on who you want to target.
The difficulty or risk level between this Ansoff Growth Matrix strategy differs depending on your priorities, as well as what you consider to be more difficult to achieve.
Diversification
This is the most risky and difficult business growth strategy among the four. Through Diversification, you will be introducing a new product or service to a new market. Although risky, this strategy can yield great results and profit, if done right.
How Do You Use the Ansoff Growth Matrix?
Since its inception, the Ansoff Growth Matix has helped many businesses grow and explore different product and advertising methods to increase their revenue and recognition. It has also helped in conducting financial analyses and managing decisions, especially when used with other strategic management tools, such as the Boston Consulting Group (BCG) Matrix and the PESTLE analysis.
The Ansoff Growth Matrix is often used in this manner:
Step 1: Develop a Comprehensive Plan
Lay the foundation of your chosen growth strategy with a detailed plan that outlines the strategy’s objectives, key milestones, timelines, and resource requirements. Define the roles and responsibilities of team members involved in the execution, and ensure that your plan is realistic and within your capabilities as a company.
Step 2: Allocate Resources
Allocate the necessary resources to support your chosen strategy and plan of execution. This might involve budget adjustments, recruiting new talent, or enhancing technological infrastructure.
Step 3: Market Research and Analysis
The tasks done in this step will vary per strategy. Here are a couple of things to consider:
- For market penetration, assess your existing market thoroughly. Identify segments with growth potential, consumer preferences, and competitor strategies.
- For product development, delve into customer needs, preferences, and emerging trends. From here, you can develop new offerings that align with your strategy and plans.
- For market expansion or diversification, research the new market’s dynamics, customer behaviors, and regulatory landscape. Consider factors like local regulations, cultural nuances, and distribution channels, and customize your approach to these factors accordingly while maintaining consistency with your brand identity.
Step 4: Develop and Test
Make sure to regularly test prototypes or concepts to ensure they meet customer expectations, then implement changes based on feedback to refine your offerings before launch.
Step 5: Strategize for Marketing and Promotion
Craft a compelling marketing and promotion strategy that communicates your strategy to the target audience. Create messages that highlight the value your new products or market expansion can bring. Utilize various marketing channels to maximize reach and impact.
Step 6: Monitor and Evaluate
Constantly monitor strategy implementation and performance. Are you meeting milestones? Are there deviations from the plan? Regularly assess progress and make adjustments as needed. Collect and analyze data to measure the strategy’s impact on key performance indicators.
Step 7: Track, Iterate, and Improve
Growth strategies evolve with market changes and customer feedback. Continuously track changes, iterate them, and improve based on the insights gained. Adapt to unforeseen challenges and embrace feedback to enhance the strategy’s effectiveness.
Additionally, make sure your employees are engaged in the whole process. Communicate the strategy’s importance, benefits, and how each team member contributes. A motivated and aligned workforce can drive strategy success, as well as better improve existing processes.
