I like matrices and, marketing, like most disciplines has its fair share of them.
One of my favourites is the Ansoff Matrix. This matrix highlights the strategic direction a business could take if it wants to grow.
The matrix considers four possible options. These are:
- Market Penetration
- New Product Development
- New Market Development
Each option has an element of risk.
Option 1 is the least risky because the idea is simply to do what you’re already doing. If you know your product and your market well, you should be on a strong footing. You may upset some of you competitors though who won’t be so happy that you’re looking for more market share.
Developing a new product or market, options 2 or 3, increases the element of risk a little. However by doing one or the other, you’ll always have at least one foot on familiar ground.
Whether you develop a new product or a new market the key is to do your market research. Market research provides a foundation that makes the ground more solid. It won’t take out all the risk but it will give you the confidence that you’re taking a productive route.
Diversification is the riskiest of the four options. This is mainly because you’re trying to do two things at the same time. A safer way to diversify is to acquire. With an acquisition you get the experience and knowledge too. A positive management culture within your acquired business will be one critical success factor.
Whichever option you chose, base the choice on sound research, test your assumptions and keep a close eye on the market. Good luck!