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Ansoff matrix


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A model for analysing the approach to product-market growth strategies developed in 1965 by H Igor Ansoff in his book Corporate Strategy. The main axes of the matrix are new or existing products and new or existing markets. The matrix has four quadrants: market penetration, existing products and markets; new product development, which involves new products introduced into existing markets; market development, which involves finding new markets for existing products; and diversification, which involves new products in new markets. The modern-day marketing practitioner may find the matrix useful mainly for well-defined markets and tangible products. The matrix framework can be used to develop product strategies for various market growth strategies:1Market penetration strategy, or penetrating the existent market with existing product, is regarded as the lowest risk strategy. This could involve more aggressive marketing and sales campaigns around the existing product. Results could include increased purchase and usage from existing customers encouraged by attractive pricing or discount offers or discounts on multiple purchases. It could be as a result of more intensive customer research and focused action such as targeted mailing of customers with relevant offers. Alternatively, it could be achieved through aggressive market share building, i.e. winning customers from competitors in the existing market.2Market development, developing new markets with existing products, is higher risk. This strategic approach seeks out new market sectors that are underdeveloped, or which are less price-conscious than the existing market. This may involve the development of new distribution channels or new retail outlets. It may also involve new geographic markets for the existing products, for example through licensing, agent, or distributor arrangements.3New product development, developing new products for existing markets, can often be the heaviest investment programme because of the cost involved in producing and marketing a new product. This may involve the development of products based upon new and untried technologies.4Diversification, developing new markets with new products, is regarded as the highest risk. It will take the company into markets and product development cycles in which it is inexperienced. It may also lead the company into making acquisitions or merging with other companies in order to gain either market or product assets.

1Market penetration strategy, or penetrating the existent market with existing product, is regarded as the lowest risk strategy. This could involve more aggressive marketing and sales campaigns around the existing product. Results could include increased purchase and usage from existing customers encouraged by attractive pricing or discount offers or discounts on multiple purchases. It could be as a result of more intensive customer research and focused action such as targeted mailing of customers with relevant offers. Alternatively, it could be achieved through aggressive market share building, i.e. winning customers from competitors in the existing market.

2Market development, developing new markets with existing products, is higher risk. This strategic approach seeks out new market sectors that are underdeveloped, or which are less price-conscious than the existing market. This may involve the development of new distribution channels or new retail outlets. It may also involve new geographic markets for the existing products, for example through licensing, agent, or distributor arrangements.

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Subjects: Marketing.


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