Marketing expert Alan Kaplan, using examples from his more than 25 years in marketing, explains why Igor Ansoff’s famous growth matrix is still relevant 55 years after its introduction and how it can be implemented by SMEs.
In 1957 Igor Ansoff developed his now famous growth matrix. While some regard it as simplistic in today’s times, the fundamentals on which it is based remain sound and companies of all sizes continue to apply the principles.
In essence the matrix is a tool that helps businesses choose the best product and market growth strategy relative to circumstances. In some instances more than one option can be implemented in the correct sequence.
ABOVE: Igor Ansoff's famous growth matrix.
Over time I have successfully helped companies grow in each of the above segments and SMEs may derive value from the strategies in the matrix, and the examples provided.
Market penetration is the least risky strategy and focuses on selling existing products into existing markets to enhance market share and profitability. This can be achieved by improving branding and marketing efforts and promotion, loyalty programs and in other innovative ways.
An interesting example of enhanced market penetration occurred at the onset of my marketing career with Cadbury Schweppes internationally, at which time consumers were encouraged to use Roses Lime Juice as a mixer in innovative ways, resulting in a significant sales increase. I received similar results with Cadbury Smash when a series of recipe leaflets and in- store demonstrations depicted how the product could be used on a far broader front. Both initiatives were well supported on the promotional front.
Market penetration has generally played a major role in my successful brand development activities over time. Recently in Australia I have been involved in assisting a broad range of companies, including the fmcg sector, increase their sales through enhanced branding, marketing and communications. In this regard, adding emotional values, and conveying these in optimal fashion, has played a significant role.
Product Development can be classified as a strategy carrying a medium degree of risk. It involves the introduction of new products into existing markets. As marketing consultant to Agrevo (Environmental Health) overseas, I made a significant contribution to growing Finale (Rodenticide) to the leading brand in its class.
An issue with the product was that it was initially available only in pellet form for indoor use. Working closely with the company, a new waterproof cube was developed specifically for outdoors. After relevant changes were made to minimise the impact on the environment, this version was launched with great success as it enabled the brand (which was a single dose kill) to position itself as the total solution for rodent problems, a move that proved highly effective.
As another example, Kellogg’s utilised a product development strategy most successfully for Nutri-Grain Bars when customer tastes changed markedly in the UK, at which time far more acceptable product options were launched and some existing variants were withdrawn.
Market Development is a strategy whereby a business introduces existing products into new markets. Like product development, this is also regarded as having a medium degree of risk. Initially Agrevo’s environmental health range focussed on the agricultural and consumer sectors, but their success was further enhanced through the introduction of excellent products into new markets such as the hospitality and health sectors. This involved niche marketing and additional product distribution.
As marketing manager of Cadbury Schweppes, I utilised this strategy to develop markets in designated country areas through marketing initiatives undertaken across a broad front including the introduction of mobile marketing trucks that undertook sampling. Additionally, export initiatives proved most successful.
Diversification carries the highest risk of all four strategy options as it involves a business introducing a new product to a new market in which it has far less, little, or no experience. A company must therefore evaluate the decision to diversify with relatively more caution. Some companies, such as Virgin, have generally diversified very successfully, but have nevertheless failed at times, as was the case with Virgin Cola.
During my tenure with Agrevo as their advertising and marketing consultant, I assisted the group to successfully diversify into the gardening sector, although the risk was mitigated through the introduction of a well experienced business partner in this sector. Nevertheless comprehensive market research played a major role in securing the positive outcomes, as outlined in a White Paper on our website.
Furthermore, I derived a strategy that enabled an SME OTC pharmaceutical company to diversify into niche cosmetic and other areas with significantly positive outcomes.
In reviewing the Ansoff matrix and examples above, SMEs should give thought to which of the strategies, or a combination, is best for their needs. In addition to the Ansoff matrix, other tools and considerations should also play a role before formulating and implementing a comprehensive growth strategy.
Alan Kaplan, PhD, is an Executive Director of Optivance 360, a multi-disciplinary consultancy that helps SMEs flourish. Alan’s international experience spans more than 25 years across academic, media, agency, client and consulting areas.
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