In This Article
Introduction
Ansoff's Matrix (also called the Product-Market Growth Matrix), developed by Igor Ansoff in 1957, provides a framework for identifying growth opportunities. It presents four strategic options based on whether you're selling existing or new products in existing or new markets.
| Existing Products | New Products | |
|---|---|---|
| Existing Markets | Market Penetration | Product Development |
| New Markets | Market Development | Diversification |
Strategy 1: Market Penetration
Grow by selling more of existing products to existing markets.
Tactics
- Increase usage among current customers
- Win competitors' customers
- Convert non-users into users
- Increase purchase frequency
- Increase purchase quantity
Methods
- Price promotions and discounts
- Increased advertising
- Improved distribution
- Loyalty programs
- Sales force expansion
Example: Coca-Cola
Increasing consumption occasions ("Open Happiness"), larger pack sizes, and vending machine placement to capture more market share in existing soft drink market.
Strategy 2: Market Development
Grow by selling existing products to new markets.
Types of New Markets
- Geographic: New regions, countries, territories
- Demographic: New customer segments
- Channel: New distribution channels
- Use-case: New applications for existing product
Example: IKEA
Expanding from Sweden to Europe, then Asia, and now India—same product concept, new geographic markets.
Strategy 3: Product Development
Grow by selling new products to existing markets.
Types of Product Development
- New features added to existing products
- New product lines
- Next-generation products
- Quality improvements
- Line extensions (new sizes, flavors, versions)
Example: Apple
Selling iPhone, iPad, Apple Watch, AirPods to the same customer base—new products to existing loyal customers.
Strategy 4: Diversification
Grow by selling new products to new markets. Highest risk strategy.
Types of Diversification
| Type | Description | Example |
|---|---|---|
| Related (Concentric) | New business with synergies | Disney into streaming (Disney+) |
| Unrelated (Conglomerate) | No connection to existing business | Tata: Steel, IT, Cars, Hotels |
| Horizontal | Similar products, different technology | Kindle for Amazon |
| Vertical | Forward/backward integration | Netflix producing original content |
Risk Considerations
Lowest Risk: Market Penetration (known products, known markets)
Medium Risk: Market Development, Product Development
Highest Risk: Diversification (unknown products, unknown markets)
Strategy Selection Factors
- Current market saturation
- Competitive intensity
- Company capabilities
- Risk tolerance
- Resource availability
- Industry life cycle stage
Conclusion
Key Takeaways
- Ansoff's Matrix presents four growth strategies
- Market Penetration: More sales in current market (lowest risk)
- Market Development: Current products in new markets
- Product Development: New products in current markets
- Diversification: New products in new markets (highest risk)
- Risk increases as you move away from existing products and markets
- Choice depends on market conditions, capabilities, and risk tolerance