If a company looks for sustainable growth, it cannot adopt a “business as usual” mentality. Even if its performance is booming, companies need to constantly look for ways to increase profits and attract new customers. But which approach should be taken? Developing new products, or opening up new markets? How do business owners determine which strategy is most suitable?
In terms of business management, Ansoff Matrix distinguishes four different brand management strategies based on the “product” and “market”, which can help companies choose brand development strategies more logically to achieve the goal of increasing revenue.
What is the brand management strategy Ansoff Matrix?
Ansoff Matrix was developed by Dr. H.igor Ansoff, the father of strategic management. He studied the corporate diversification and distinguished four factors that comprehensively affect corporate operations (existing products, new products, existing markets, and new markets), and assemble the corresponding operating strategies. The following introduces each one of them with examples.
Old Market – Old Products: Market Penetration
Using the existing product portfolio to increase market share, attract consumers to switch to their brands, and increase purchase frequency and quantity. This strategy is more suitable for low-risk daily business and focus on market consolidation. Relevant tactics include:
- Expanding the distribution channels.
- Increasing the scale by mergers and acquisitions.
Example – Since its establishment, Google’s market share in the search field has increased year by year. Through its core product, its search engine, Google continues to grow and dominate the search market.
Old Market – New Products: Product Development
The product line extension strategy: based on category, it can be divided into length extension and depth extension; based on quality, it can be divided into upstream and downstream. Length extension increases product categories, such as adding scarves or bracelets to the fashion market, while depth extension increases styles, such as the material classification of scarves or the color of bracelets. The up/down-stream strategy is to explore higher/lower-end product markets. Product development strategies focus on existing customers and develop new products to meet the emerging or potential needs.
Example – As Instagram expanded its market share in the social media space, it started experimenting with new features to gain more attention in the same market, in such to grow rapidly.
New Markets – Old Products: Market Development
Promoting existing products to new customers. Identifying specific new target customers, use market segmentation to identify the differences in demands between new markets and old markets, and concentrate resources on developing emerging markets.
Example – When Facebook was first launched, it followed an incremental model to expand into new markets. First it was opened to universities in the United States, then to other regions and people, until it expanded to all parts of the world.
New Markets – New Products: Diversification
Breaking through with new products in emerging markets carries the highest risks. The diversified operations of enterprises can be reflected in horizontal and vertical integration. Horizontal integration includes mergers and acquisitions or forcing out competitors; vertical integration divides into upward or downward integration, with the former competing with suppliers and the latter competing with customers. Diversified operations can be divided into related and unrelated. The former companies are still in the core field, while the latter are not.
Example – When Apple launched the iPhone in 2007, it risked cannibalizing its most successful product, the iPod. The iPhone successfully became a new smartphone that was much beyond a music player and opened up a new market.
Conclusion
Ansoff Matrix is more suitable for companies in the maturity and growth stages, especially for companies that want to expand market share and increase sales. Brand Management Strategy Ansoff Matrix can help business owners decide which strategies are most suitable for their business goals and circumstances. By understanding different strategies, businesses can make more informed decisions and maintain a competitive advantage in a competitive market.