April 18, 2020

Dominate the Market the Ansoff Matrix Way | Market Penetration Strategy Explained

Model Name: Ansoff Matrix
Creator: Igor Ansoff
Year: 1957
Purpose: Market penetration appraisal | growth strategies evaluation | business discipline | assessment of opportunity costs | risk awareness | market planning and management | product promotion | brand repositioning | market impact elements analysis

Are you settling for “just fine”?

True leaders know very well that when things are going “just fine” for the company, it is easy for the “business as usual” mindset to sink in. Once that happens, the game is over.

Sure, you have an existing market, and you have existing products that are doing well in the said market. From a distance, everything does seem to be going just fine.

But, I mean, is that enough for you? Of course, it isn’t. So don’t settle for “just fine.”

Believe me when I say that this is not the time to sit back and relax – this is a very crucial time that your organization should be making the most of.

As cliché as it sounds, you have to think long term. I know, it’s been said a million times. Maybe that’s why so many companies take it for granted.

“Long-term organizational growth doesn’t happen by itself. Long-term growth is put into action by the business growth strategies you implement today”

In simple words, while things are going well for your business, you should be capitalizing on this stress-free time by focusing on a future where things aren’t just going well, they’re going great.

This can be achieved by introducing new products, exploring unchartered territory by entering new markets, or finding a way to really dominate the existing market.

There is no shortage of business growth strategies, but implementation and execution are easier said than done.

A closer look at the quadrant

So where does the Ansoff Matrix factor into the equation?

If you’re in business, or if you’ve ever studied business, there’s no way you haven’t heard about the Ansoff Matrix.

Ansoff Matrix and its four options

Created by Igor Ansoff (the father of strategic management), the Ansoff Matrix encapsulates the essence of modern strategic thinking in the most succinct way.

Ansoff outlined the two approaches to developing business growth strategies: product diversification and market diversification.

With the same beautiful simplicity, he delivered four strategic options in his product market growth matrix, varied by the nature of the market, the nature of the product, and business risk:

  • PRODUCT DEVELOPMENT STRATEGY
  • MARKET DEVELOPMENT STRATEGY
  • DIVERSIFICATION STRATEGY
  • MARKET PENETRATION STRATEGY

Market penetration is the name of the game today.

This core business strategy is considered the lowest risk approach to long-term business growth. Ansoff placed it in the quadrant that utilizes existing products, in an existing market.

Consequently, market penetration is basically achieved by selling a growing number of similar products in an existing market. You can estimate your market penetration by calculating the amount of sales volume of your existing product versus the total theoretical market for said product.

Sounds like the market penetration strategy cuts the groundwork for business growth in half, right? No need for new products, no need to dip your toes in unchartered territory.

Well, I will admit it is the most straightforward solution for growing your business. So long as you’re in an expanding market, this is the most reliable way to effectively trigger more significant growth. However, it is not as simple as it sounds.

Take a look at your current business standing in the light of the market penetration strategy.

What this business growth strategy teaches you is to sell your existing product/product line more; both to current customers, and to new customers who can be thought of as belonging to the same marketplace.
Now that we’ve decided that market penetration is the way to go, it’s time to get down to business.

Market penetration in a pinch

Market Penetration Strategy

Increase the market share of current products

With the right sales promotion strategies, innovative advertising ideas, and competitive pricing approach, you can increase the market share of your existing products without having to take any significant risks.

Lead the market expansion

Have you ever considered that you can expand the existing market by identifying new niches and demographics within?

The most brilliant example of this approach is identifying a variation in the age distribution of your product users. Then, you aggressively market your existing products to this new age group and dominate this new territory before competitors even realize what’s going on.

This is precisely the story of the cell phone industry, which realized over a decade ago that teenagers are swiftly emerging as a strong user demographic.

Previously users in their 20s were targeted the most aggressively as they were believed to be the biggest consumer group.

Cell phone companies modified their sales, marketing, and promotional strategies to dominate this new sector within the existing market, leading to unprecedented levels of growth in market share.

Restructure an existing mature market

If you have your hands tied in a saturated market with the little promise of market expansion, you have to play a different way.

This approach directs you to run aggressive promotional campaigns with an extraordinary pricing strategy. As a result, smaller competitors will deem the market as no longer attractive, and they will see themselves out.

An ideal example of this strategy was executed by Google itself, with Gmail. Gmail was definitely not born in the pioneering days of email, yet it almost immediately started dominating the market like no other mail system before it.

Increase usage by existing consumers

One last approach I will discuss pertaining to market penetration strategy is managing to convince existing customers to use your product more frequently.

Consider loyalty schemes, enhancing your product with greater value, or modifying your product so that it offers more benefits and encourages greater use.

Why do you think smartphones upgrade models every 6 to 12 months with better capabilities and newer features?

The bottom line

Your company needs to continually search for new ways to increase profits and reach new customers. If you don’t, you’ll fall behind in no time because there’s plenty of competitors who will constantly be striving to get ahead.

A successful market penetration strategy is waiting within your reach to boost your business growth without the need for substantial investments or heart-stopping risks.

What you need to do is make sure you understand the market like the back of your hand, and watch your competitors’ activities like a hawk. One little quadrant of the Ansoff Matrix may just be enough to change your life.