What is the Ansoff Matrix?

The Ansoff Matrix is a tool that helps companies decide which Strategy they should focus on, based on 2 variables: Product and Market.

 

These two variables are classified into 2 categories:

  • New.
    • Products.
    • Markets.
  • Existing.
    • Products.
    • Markets.

 

The result is a 2 x 2 matrix that, depending on these variables, suggests one Strategy or another.

Ansoff Matrix 4 Scenarios

1. Market Penetration: Offer what others are already offering but better or in a different way.

  • Existing Product.
  • Existing Market.

 

2. Diversification: Try different things since nobody knows what works.

  • New Product.
  • New Market.

 

3. Market Development: Focus on the Market and How to adapt the Message to it.

  • Existing Product.
  • New Market.

 

4. Product Development: Focus on the Product and How to adapt it to the Market.

  • New Product.
  • Existing Market.

Ansoff Matrix representation.

 

Let’s look at these scenarios in more detail:

Market Penetration scenario

 

If you think about it carefully, if you offer a Product that already Exists in a Market that already Exists

  • You have to do something better or different.

 

Else, someone will do it, and your competitors will “eat” your product little by little.

 

It seems obvious, but lots of companies we’ve analyzed don’t even think about it.

  • They just offer what everyone offers.

Diversification scenario

 

A New Product in a New Market is the maximum uncertainty that can be faced.

  • Will it work?
  • Will the Market accept it?

 

It is very difficult to do it right and not lose money in these scenarios.

 

Therefore, the safest and more sensible Strategy you should follow is to Diversify your offer.

  • Offer different versions, products, messages (keeping the coherence, of course)…
  • And stick to what works.

Market Development scenario

 

When you already have a well-defined product and you offer it to a New Market…

You should worry about your Marketing Strategy.

 

What works in one Market doesn’t work in another.

  • The Message must be adapted to the singularities of each Market.

Product Development scenario

 

When you launch a New Product in a well-defined Market, you should adapt this product to it.

  • Up to a point, of course.

 

The “core” of your product should remain intact.

  • Otherwise, you would be talking about a different product.

 

But some of its characteristics should adapt to what this Market values the most.

At this point, you are probably wondering:

  • “But, wasn’t the BCG matrix the most important Strategy Matrix?”.
  • “What matrix am I supposed to use?”.

 

Now, we’ll explain you the difference between the famous BCG Matrix and the Ansoff Matrix.

  • And when should you use each one of them.

Difference between Ansoff and BCG Matrices

 

The Boston Consulting Group Matrix, or BCG Matrix is one of the most famous Strategy Tools.

  • Much more famous than the Ansoff Matrix.

 

The BCG Matrix focuses on 2 different Variables:

  • Market Growth.
  • Market Share.

With these 2 variables, the BCG Matrix categorizes a product and what a company can expect from it.

 

On the other hand, the Ansoff Matrix focus on what Strategy a company should follow.

 

These 2 Matrices use different variables.

  • You can (and should) use both  in your Business projects.

 

When to use the Ansoff Matrix

 

If you are wondering when to use each one of these tools, we suggest:

  • If you already have your product on the Market, you should use the BCG Matrix.
  • If you haven’t released your product yet, you should use the Ansoff Matrix.

 

* We have a whole Page dedicated to the BCG matrix with plenty of useful examples. See the link below.

Enough theory.

 

Let’s see some real examples:

Ansoff Matrix examples

We’ll now share 4 real examples that perfectly explain how Ansoff Matrix can be used:

  • We’ll give you one example of each scenario.

KFC Burgers - Ansoff Matrix Market Penetration example

 

In the beginning… KFC only offered Fried Chicken.

  • It is greasy, it is not healthy, and there are many alternatives…. But we love fried chicken.

 

Over time, KFC began offering Burgers (and wraps, etc).

 

Why?

  • Maybe because if 4 friends want to have “Fast-Food”, not everyone likes fried chicken.

 

What did KFC do?

  • They entered in a pre-existing Market where they already were.
    • Fast Food Market.
      • There was McDonalds, Burger King, Wendy’s, etc.
  • With a pre-existing Product.
    • Burgers.

 

They offered fried-chicken burgers.

 

With this product:

  • KFC created a new approach to the classical Burger.
  • KFC generated synergies with their “core product”.
    • They only had to “add bread”, tomato and cheese to the chicken.
  • KFC offered “more things” to their usual customers.

 

They offered a traditional product, but in a new different way.

Online Business - Ansoff Matrix Diversification example

 

When the Internet started… No one knew anything about its future.

  • Nobody knew how to monetize a Site.
  • Nobody knew that e-commerce would become so popular.
  • Nobody knew that blogging would become “profitable” business.
  • Nobody knew that Social Networks would become extremely popular.
  • etc.

 

Now, all of this seems obvious.

  • But, 25 years ago, it wasn’t.

 

The companies that obtained the best results were the companies that Diversified their offer.

  • Initially, Forums and Chats were very popular.
  • Then, the most successful Sites improved their presence on Social-media.
  • Then, some Sites started a YouTube Channel.
  • Sponsored content, Ads, e-commerce.
  • etc.

 

Think about Amazon: they started with just books.

  • Now, they do… everything.

Supreme - Ansoff Matrix Market Development example

 

In case you don’t know (in Europe is not as famous as in the USA) Supreme is a skateboarding clothing brand.

 

Over the years, their clothes became so popular that people was willing to pay hundreds of dollars for some of their products.

  • People got crazy about this brand.

 

Supreme realized that and (almost) “discovered” a new Market:

  • Luxury for teenagers“.
    • And some adults who think they are still teenagers.

 

They developed a very interesting Strategy.

  • Limit production and promote their products through “Influencers”.

 

Louis Vuitton, a traditional luxury brand, got very impressed with this brand and this “New Market”.

  • And… started to collaborate with them.

 

 

Louis Vuitton adapted their Message; their Marketing, to this New Market.

  • They learned from Supreme.

 

* We talk more about this interesting “alliance” in our “Product Mix” page.

McDonalds in India - Ansoff Matrix Product Development example

 

When McDonald’s expanded its Business outside the US, they had to make some changes to their Menu to reach as many customers as possible.

 

If you conceive McDonald’s as a product itself:

  • They were a New Product.
    • McDonald’s is so famous and “characteristic” that it is difficult to compare it to local restaurants.
      • You can consider it the first “American fast food” restaurant that all countries have.
  • They were expanding into an Existing Market.
    • Fast-Food Restaurants.
      • All countries have their own “Fast Foods”.

 

What did they do?

  • McDonald’s listened to what local people loved the most
    • … And made their own version of it.

 

They listened to the Market and adapted their product to it.

 

That is why:

  • In India: they offer the Maharaja mac.
  • In Hong-Kong: they offer a pasta and sausage-based Ramen.
  • In Thailand: they offer coconut-based desserts.
  • In China: they offer a Honey Chicken rice bowl.

 

* If you are interested about it, here you have an interesting article that talks more about it:

Summarizing

The Ansoff Matrix is a tool that helps companies decide which Strategy they should focus on.

  • It uses Product and Market novelty as the main variables.

 

Using these 2 variables, it generates 4 possible scenarios:

  • Market Penetration scenario.
  • Diversification scenario.
  • Market Development scenario.
  • Product Development scenario.

 

Although the Ansoff Matrix is a very helpful tool that you should always consider, it is very important to use it when you haven’t launched your product yet.

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