Product Matrix

Joran Hofman
April 4, 2021

What is a Product Matrix?

A product matrix, better known as the Ansoff matrix, is an analytical procedure created by Igor Ansoff in 1957 that studies and evaluates the situation of a certain business in the market through the use of four quadrants.

This serves to recognize new opportunities since it gives the organization a guide to channel its efforts to position itself in the market and establish the most optimal way to achieve the proposed goals.

Benefits of the Product Matrix or Ansoff Matrix

The main advantage obtained by using the Ansoff matrix consists of being able to structure and represent, in a simple way, the possibilities of expansion of a company.

This matrix allows:

  • Quantify the relative participation in the market by annual sales.
  • Classify the company's products
  • Measure the growth rate of the industry in which you compete.

The four strategies of the Product Matrix or Ansoff Matrix

The Ansoff matrix has for quadrants or strategies that are applied to grow and analyze the risks of a company.

Recommended Reading: The Ansoff Matrix - Strategy Planning for Marketing Proffessionals

Product development

The products or services that require a higher risk should be included in the upper right box.

Product development includes the entry of a new product to the market with the purpose of expanding the portfolio or modifying an existing product.

Market penetration

This is located in the upper left part and is the safest position of all the options since it should include the products that work and are known and from which no surprises are expected.

When developing market penetration, the company should focus on expanding sales volume, that is, increasing market share within existing segments, whether by selling more, through promotions, or by seeking new customers.

Diversification

Diversification is placed in the lower right quadrant, which consists of including a new product in a new market for the company to increase market share.

Market development

Completely new products on the market, which are intended to expand the product portfolio, should be listed in the lower-left quadrant.

With the development of markets, guaranteed success is obtained if you have a unique technology in the product or if the buyers in this new sector are very profitable.

Example of Product Matrix or Ansoff Matrix

Let's analyze, for example, a restaurant that is looking for strategies to grow, so it uses the Ansoff matrix:

  • In the first analysis, the restaurant proposes to carry out market penetration, so it decides to expand its customer base and start advertising on social networks to attract more public.
  • When analyzing the development of markets, it is proposed to grow, open another branch in another city and take its product to a new market.
  • Regarding the product development strategy, the restaurant decides to market and produce new products, expanding its menu offering, now, Japanese food.
  • Finally, when carrying out diversification and seeking to offer a new product to a new market, he decides to open another branch of the brand but a fast-food one.

Advantages and disadvantages of the Product Matrix or Ansoff Matrix

The Ansoff matrix is ​​a useful tool when considering market positioning and growth options. While diversification is considered the riskiest, it has been said that risk is reduced if a product is successfully diversified across multiple markets. The general objective of using this matrix is ​​to create a strategic plan for the growth of a product. 

The challenge of using the Ansoff matrix is ​​that it does not consider aspects such as competition in different markets, the current economy in each market, and flexible structures. That said, the Ansoff matrix can help product managers anticipate risks during a product's growth phase.

In conclusion, the use of the Ansoff matrix cannot hurt when developing a new product. It is always a good idea to assess the risks and the matrix certainly helps to do so with a simple, easy-to-see grid. Using the grid, you can view the risks associated with each option and develop a contingency plan for your new product launch, increasing your chances of success.

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