In this post, I’m ready to explore another essential model frequently used in marketing contexts.
For those interested in marketing and those who may have studied it, this model will likely be a familiar concept. For others, it might be the first introduction to it.
In any case, I believe it’s beneficial to revisit these models occasionally, as they can provide valuable insights.
Ansoff’s growth matrix is a model primarily used for internal business analysis to identify growth opportunities.
It focuses on how a company can strengthen its current market position and take the chance to expand into new markets.
The growth matrix is divided into four areas with two main focuses—one on the product and the other on the market.
Below, I go through the four areas one by one.
If you’re interested in the most common critiques of this model, I’ve summarized them at the end of this post.
Other relevant models
It’s always valuable to consider relevant models in marketing efforts.
Models stem from theories grounded in the real world, making them practical tools to keep in mind for marketing work.
If you’re interested in learning more models, here’s a collection of posts where I briefly describe the essential elements of each:
- The 4 Ps: Four parameters a business can adjust to achieve the most profitable strategy.
- SWOT analysis: Analysis of a business’s strengths, weaknesses, opportunities, and threats in the market.
- AIDA model: A communication model for creating effective advertising campaigns.
- SOR model: Explores whether a business can succeed with its marketing campaigns.
Ansoff’s growth matrix
Market penetration
Market penetration is a strategy aimed at increasing sales of existing products.
This could involve finding new uses for products, making them more appealing to the existing audience, or using strategies to attract competitors’ customers.
Strategies should consider product differentiation—how your products stand out from competitors and why their customers should choose yours.
This area of the growth matrix is often regarded as one of the “safer” strategies, as it involves familiar territory for the company. However, the growth potential here is relatively limited.
Market development
Market development involves expanding the market by selling products in a new market.
This could mean expanding to new cities nationally or entering new international markets, opening up opportunities to reach new customers and target groups.
This strategy is resource-intensive, requiring time to establish the products in a new market.
Product development
Product development focuses on improving existing products or services or launching a new product line.
Examples include enhancing current products or introducing complementary services that, together with the company’s existing offerings, address new consumer needs.
This strategy can be lucrative and drive growth by meeting more consumer needs while staying within the same market.
Diversification
The final area is diversification, which includes two types: concentric and conglomerate diversification.
- Concentric diversification: Creating new products relevant to the market the company already operates in.
- Conglomerate diversification: Entering a new business area unrelated to the company’s current market.
Diversification strategies can be costly, involving significant efforts to develop new products or services, whether within the existing product portfolio or in an entirely new market.
At the same time, this strategy is generally considered the one with the highest growth potential.
Criticism of Ansoff’s growth matrix
Ansoff’s growth matrix is a helpful tool for identifying growth opportunities in a business.
However, it comes with critical limitations.
The model focuses solely on growth opportunities, neglecting potential constraints.
To address this, it’s necessary to incorporate market knowledge and other models, such as the SWOT analysis, which examines weaknesses and threats, for a more realistic perspective on a company’s growth possibilities.
Comments