The Ansoff Growth Matrix - How to Develop New Business Opportunities

Ansoff Growth Matrix

Professor Wolters presents the Ansoff Matrix as a framework for generating business-growth ideas. It organizes opportunities by whether a company is selling current or new products to current or new customers. The four strategies differ in how much a business must change its product or customer base, and some initiatives may fit more than one quadrant.

Growth strategies

Market penetration: Current products, current customers

Aim to increase purchases or usage among existing customers. Tactics include loyalty programs, more convenient buying options, extended operating hours, and online sales.

Examples include Target’s 5% card discount, Delta’s frequent-flyer miles, and McDonald’s 24-hour locations or drive-throughs.

Action: Encourage repeat purchases and make existing products easier to buy.

Product development: New products, current customers

Develop offerings that meet the needs and preferences of the existing customer base. Use marketing research, customer surveys, feedback, and direct conversations to identify potential products.

Examples include a restaurant adding salads, vegan, or gluten-free options, or a travel channel asking subscribers which destinations they want covered.

Action: Build strong customer relationships so people are willing to share useful feedback.

Market development: Current products, new markets or situations

Take existing products to new customer groups, locations, or occasions. Companies often start with markets similar to those they already serve. Unfamiliar domestic or international markets require research into local needs and the value proposition that will resonate.

Examples include Culver’s expanding from Wisconsin into nearby Midwestern states, or Taco Bell selling breakfast to customers who may already buy its dinner.

Action: Adapt how the product is positioned for the new market. For example, warm clothing may be a weak selling point in Portugal, while its usefulness for travel to colder destinations could be more relevant.

Diversification: New products, new markets

Enter a new product category and reach a new customer group, often in a market unrelated to the company’s existing business. This can create new growth, but it is riskier because the company may lack experience with both the product and the customers.

Examples include Microsoft launching Xbox, or media channels shifting toward different content, such as the Travel Channel emphasizing paranormal programming.

Action: Assess whether a diversification opportunity supports long-term business health, not just short-term revenue.

Practical playbook and considerations

• Use the matrix as an idea-generation tool. Wolters describes challenging clients to develop seven ideas for each quadrant.
• Consider whether a tactic fits more than one quadrant. For instance, online sales can serve existing customers while also reaching new ones.
• Match the growth approach to the industry. Fast-food companies may need frequent product launches to stay competitive, while other businesses may rely more on selling existing products more effectively.
• Evaluate the long-term impact of growth decisions. A move that boosts short-term sales could weaken brand positioning or customers’ willingness to pay later.
• No formal revenue, margin, acquisition-cost, or growth targets are provided. The numerical examples include Target’s 5% card discount and an example of a 10% loyalty discount.

Presenter/source: Professor Mark Wolters (Professor Wolters).