Strategic Tool Box Serie (#4) The ANSOFF Matrix: determine your growth strategies

In these difficult times that the whole world is going through with the health crisis caused by Covid-19, business development is a real challenge that business leaders must face. To successfully relaunch the growth of a business, you must make the right decisions. And, the Ansoff matrix is an effective decision-making tool that can help define a solid strategy to boost your business development.

When use the Ansoff Matrix ?

The Ansoff Matrix is a marketing and strategic analysis tool that focuses on identifying a company’s growth opportunities. Ansoff’s Matrix is also known as the Product/Market Matrix or Growth Vector. Its main purpose is to serve as a guide for businesses looking to grow. Either in the market they currently participate in or in other markets not yet explored.

Origin of the Ansoff Matrix

The Ansoff Matrix was developed by H. Igor Ansoff and first published in the Harvard Business Review in 1957, in an article titled "Strategies for Diversification".

The Ansoff Matrix in practice

The Ansoff Matrix presents with 4 ways to grow your business. Today’s article introduces you to this matrix and tells you how to use it.

Markets penetration

Ansoff Matrix: Existing Products/Existing Markets

The question that needs to be asked here is how do we sell more of our current products to our current customers?

Several strategies can be considered:

• Brand repositioning

• Addition of new distribution channels (in current markets)

• Implementation of a loyalty program

• Implementation of CRM (customer relationship management system)

• Promotional campaigns

• Discounts and offers according to customer segments

In any case, the objective is to seek a larger share of the existing market, without making changes to its current products.

Markets development

Ansoff Matrix: Existing Products/New Markets

The question that needs to be asked here is how do we sell our current products to new customers?

Several strategies can be considered:

• Addition of new distribution channels (online sales, catalog sales, sales force in new territories, etc.)

• Addition of distribution partners in new territories (agents, brokers, distributors, resellers)

In any case, the objective is to cover a larger territory, without making any changes to its current products.

Products development

Ansoff Matrix: New Products/Existing Markets

The question that needs to be asked here is how can we transform our current products or what new products can we offer our current customers?

Several strategies can be considered, but first, you have to know your customers perfectly. To do this, it is important to put in place strategies that will make it possible to collect relevant information on the purchasing habits of its customers and ideally, this analysis should be done by customer segments (groupings by brands type, by geographies, by final consumers, ...)

In any case, the objective is to continually offer the product that best meets the needs of its current customers (and which we assume here, loyal).

Diversification

Ansoff Matrix: Future Products/Future Markets

The question to ask here is what are the interesting market opportunities right now that our company is not covering?

For example, perhaps you manufacture a product from a sophisticated and efficient assembly line, but which is not used at full capacity, and which therefore does not return the expected ROI. You could then consider manufacturing a new product (which is obviously in demand!), which requires the same type of assembly line (with a few adjustments), in order to make the use of your assembly line profitable and thus achieve new sales. in new markets.

Conclusion / Takeaway

If your business is looking to grow, it should take the time to explore the 4 options presented by Ansoff’s matrix.

Advantages

• Ansoff’s matrix makes it possible to consider growth and development strategies in a factual and objective manner.

• The product-market couple is one of the foundations of the marketing approach: there are no risks in using it.

• The analysis of the different vectors of growth allows managers a dynamic approach to the evaluation of possible axes of development.

Precautions to take

• Before making a decision, it is important to measure the desired leap in growth versus the evolution of current activities.

• Beware of the dispersal of resources and the temptation to develop in all directions.

• Who says additional growth, also says investment: clearly define which investment for which objective.