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Understanding the Product Marketing Expansion Grid

Understanding the Product Market Expansion Grid
When bringing a product to market one of the most effective methods is using the product market expansion grid.
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If you run a business, you know that taking a product to market is one of the most challenging aspects of the job. Because it can feel like such a formless, challenging process, people have been fighting to bring some structure to it for years.

 

One of the most effective methods is the product market expansion grid. Used by companies to plan for expanding product range, entering new markets, or boosting the sale of existing products, this grid provides a tried-and-true roadmap that can help you succeed.

 

Here’s what you need to know.

What is the Product Market Expansion Grid?

Also known as the Ansoff Matrix (named after Russian business manager and applied mathematician Igor Ansoff), the Product Market Expansion Grid is a tool designed to help companies grow (1). It does this by examining the link between existing products and new offerings, new and existing markets, and the risk associated with the relationships between these various elements. The matrix aids growth plans by introducing new or existing products in new or existing markets. 

 

While this doesn’t exactly sound revolutionary, the matrix works uniquely: it’s designed to allow companies to plot their new and existing products according to the markets they will be launched in. The matrix also considers the level of risk associated with a given strategy and provides it a corresponding spot on the grid. For example, developing a strategy that relies on existing products in existing markets is considered low-risk, while launching a new product in a new market is a high-risk venture. 

 

Product Market Expansion Grid

When Should eCommerce Companies Use the Product Market Expansion Grid?

The beautiful thing about the product market expansion grid is that it’s flexible. It can apply to many different companies in many different eCommerce settings, depending on the circumstances. As a general rule, these are good times to consider product market expansion:

The Product Market Expansion Grid

The Product Market Expansion Grid is simple yet powerful. It works by offering four suggested strategies: Market Penetration, Market Development, Product Development, and Diversification (2). Here’s a breakdown of each:

Market Penetration Strategy

This strategy is considered low-risk, as it involves existing products and existing markets. This strategy generates growth by focusing on leveraging a company’s current products within its existing markets. In these instances, customers are generally aware of a product but are not purchasing it due to a flaw in the company’s marketing strategy (3).

 

Thus, the market penetration strategy focuses on the following:

Product Market Expansion Grid2

Market Development Strategy

This strategy involves some risk, as it leverages existing products in new markets. This strategy is ideal for companies that have identified previously overlooked markets or who want to significantly expand their market reach (4). The market development strategy utilizes the following tactics to drive results:

Product Market Expansion Grid 3

Product Development Strategy

Like the market development strategy, product development strategy involves some risk. This one leverages new products in existing markets. This tactic is ideal for companies who want to launch a new product in an existing market. 

It’s great for times when products that used to be popular aren’t selling any longer. Companies must approach this strategy with caution, though, since it tends to be more expensive and time-consuming than market-focused tactics. 

 

To work, companies must collect detailed market analysis, including data on customer needs. This early research helps ensure products are useful and will stimulate growth. 

 

The product development strategy uses the following methods:

 

Product Market Expansion Grid 4

Diversification Strategy

The Diversification Strategy is the highest risk strategy in the product market expansion universe. Used when companies want to introduce new products to new markets, diversification requires a significant commitment of both time and resources. 

 

Don’t let that stop you, though: while diversification is likely to be the most expensive approach, it’s also one of the most productive. By leveraging diversification strategy, a company basically “hedges its bets.” In other words, the company ensures that should its products suffer in one sector, it will be able to rely on another, less affected sector. Additionally, this strategy helps brands grow their skills, utilize new technology, and master data and advertising in a more functional way (5). 

 

As it stands now, there are three separate, unique diversification strategies: concentric diversification, horizontal diversification, and conglomerate diversification.

Product Market Expansion Grid 5

Bringing it All Together

While the four arms of the product market expansion grid are useful, there’s a time and a place for each, and understanding how (and when) to use them is critical to their success. To ensure this, you need a professional that can move fluidly through the different phases and considerations of the product market expansion grid.

 

As a general rule, full-stack marketing experts are best suited for this role (6). Because they’re “multi-lingual” when it comes to the technology and marketing strategies used by high-performing businesses, they’re the ideal team members to help you leverage different tactics (including advertising, content marketing, and market research) to expand your product’s market and increase sales (7). 

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