The Ansoff Matrix Providing strategic options is a role of the marketing plan, but how does the marketing team come up with bright ideas? Fortunately there is a simple tool that can help – the Ansoff Matrix. Developed in 1957 it still holds true today – a 2 x 2 matrix that guides planners in coming up with options. Basically, it gives you four options dependent on two variables – developing new products or entering new markets. New product development and entering new markets involve expense and therefore risk.
They also produce risk to your brand – if an undertakers’ firm were to branch out into whoopee cushions their credibility as an undertaker would be scarred! Therefore, the further down or right on the grid you go, the higher the risk. When is a product entirely new or when is it just an amendment? That is subjective, so judgement must be used – a car manufacturer producing a new model probably doesn’t count as “new” but if that same company were to launch a mission to Mars it may well do… There is no guarantee of success for any plan, as highlighted below: Market Penetration
You stay with the same product and keep selling it to the same people. So how do you grow? The answer comes from adjusting the marketing mix – maybe promoting yourself better, making the product better or lowering the price. It is the least risky option, but consequently is likely to reap the least reward. A good example of market penetration is Fuller’s London Pride – once a regional ale in the South East but now the best selling cask ale in the UK (CAMRA). They have done this by relying on a high quality product but increasing promotional activity – particularly advertising connected with sports events.
On the other side is Rover – they kept selling similar cars to the same market but just lost touch. The product was well-overtaken and badly promoted, and the results are there for all to see. The moral of the story? Even if you do nothing, make sure you do something! Product Development If you have a well-respected brand with your customers, it may be possible to sell them other things. This is probably the most common option to head in as companies can use the good will they have in the market to generate credibility. As long as the new product in question isn’t too left-field, customers will like it.
Mont Blanc built up a reputation over a hundred years for producing the finest quality pens. For many people a Mont Blanc is the pen to have. The trouble is, once you have a fountain pen, ballpoint and a pencil, that is it. Mont Blanc’s quality means you may have the same pen for life, so you will never buy anything from them again. As a result, Mont Blanc decided to start selling you other things: cuff links, wallets, notebooks and so on. The same high quality prestige brand transferred to other products with great success. Possibly the world’s best-known brand got it seriously wrong when they launched a new product .
Coca Cola’s premium bottled water, Dasani, was launched their existing UK consumer market, but unfortunately they got it very wrong. Dasani was little more than bottled tap water and the fall-out hit Coca Cola hard. It wasn’t Coke’s first time though after the New Coca Cola debacle nearly ruined them. If you are going to launch a new product, make sure that it reflects your brand and won’t damage what you already have. Market Development Selling the same product to a new market is a tricky proposition, but a number of companies have done it very well.
Guinness, Lucozade and Skoda have all managed to salvage weak brands by launching them into a new market. However the most successful repositioning was Sony PlayStation – a repositioning that was pre-planned, not firefighting. Sony had planned to sell PlayStations to children then, once the product life cycle had reached maturity, relaunch in the adult market – enter Lara Croft. Failed repositionings litter the history of marketing but, for me, the most interesting is that of cricket. Some marketing chaps went to America, saw baseball and thought “Wow! That will make cricket trendy! Cricket clubs suddenly had silly names like Scorpions (what on Earth have scorpions got to do with Derbyshire anyway) and music was blasted out every time a run was scored. The youth market was not impressed. It was only when the core product was improved that cricket’s popularity returned – thanks be to Freddy Flintoff and co. Diversification So, you know nothing about the market you are selling to or about the product you are launching. Sounds like a recipe for disaster… The risks of diversification are potentially grave, but the rewards can be enormous.
Caterpillar used to make yellow diggers and bulldozers and sold them to construction companies. Now they sell boots to young adult consumers. Apple used to sell computers to graphic designers. Now they adorn the belt of just about every 16-24 year old in the country with the iPod. The reward has been easy to see. When diversification goes wrong, you can be left with a feeling of: “What were they thinking? ” Sir Clive Sinclair produced and sold one of the first home entertainment systems, the ZX Spectrum. Then he decided to produce a convenient new form of transport. Still, a C5 can be worth a fortune on EBay.