At work today I was looking at ways we could grow our product range and I found myself using a tool called the Ansoff matrix.

When I was doing my MBA a few years ago I came across this concept in one of the marketing subjects and found it useful and have used it ever since.  I hope as you read this article you’ll see how valuable it could be in your business.

The Ansoff matrix is a tool to help you identify opportunities to grow your business.  It breaks things into four segments depending on whether they look at new or existing products and new or existing markets.  Have a look at the table below to get a feel for the four options.

The safest way to grow your business is by looking at the top left quadrant – market penetration.  This involves selling more of your existing product to your existing market.  If you’re an accountant this could mean selling your range of accounting services to either existing clients, or new clients who are similar to your existing  clients.  If you run an internet business selling e-books, it means finding new customers for your books.

The next area to look at is market development.  This involves selling more of your existing product to new markets.  The new markets could be geographical – i.e. opening a new store in a new location – or it could mean advertising in different media to attract a different type of customer.

The third option is product development where you look to sell new products to your existing markets.  You need to make sure that the new products are wanted by those clients so do some initial research and testing, but this can be a very effective way to achieve higher product penetration amongst your loyal customers.  Banks do this all the time where they try to cross sell a range of products – insurance, bank accounts, personal loans, housing loans etc.

The final option, and perhaps the most risky, is diversification, where you take your new product and aim to sell it to a totally new audience.  Whilst this carries the most risk, if you get it right it could be very lucrative.

How does this help me?

So what does this mean for you?  Take a few minutes out to think about your business and the types of products you currently sell, and the types of customers or markets you have.

Have a think firstly about market penetration, and think about ways you could sell more of your existing product to your current customers.  Get creative, don’t censor yourself and just write.  Once you’ve exhausted those options, think about what new markets or people you could sell the same products to.

Once you’ve finished the first half of the exercise, have a think about new products that could be suitable for your existing customers.  If you do any customer research, ask them what they’d want.  Look at other consumer research to find out what issues your customers face and look at ways you can fill the gap.  In our financial planning business we’re looking at ways we can introduce accounting and lending services to our clients.

Finally, take those new products and look at other markets you can sell them to.  Once you’ve done that, have a think about some totally new products you could sell to totally new products – forget what your existing clients want and instead dream up products that different groups of people need.

The takeaway

No matter what business you operate, the Ansoff matrix can be useful if you take the time to work through each of the four areas.  Each time I’ve used it with people we’ve come up with innovative ideas that we can use – starting this blog was the result of one of those sessions.

I invite your comments – let me know if this is helpful and useful for your business.  Share some ideas here about how you’ll use this in your business.