Business growth is a top priority for any entrepreneur. However, with so many different strategies available, it can be difficult to determine which one is the best fit for your company. One approach that has gained popularity is the market product grid.
The market product grid is a tool that helps businesses visualize the risks of expansion and develop growth strategies. It was first introduced by Harvard Business Review and has become a staple in business school curriculums worldwide. In this article, we will explore what a market product grid is, its purpose, and how it can help businesses grow.
Key Takeaways
- The market product grid is a tool that helps businesses visualize the risks of expansion and develop growth strategies.
- The grid includes four growth strategies: market penetration, market development, product development, and diversification.
- By using the market product grid, businesses can make informed decisions about marketing, distribution, and product development.
What Is A Market Product Grid?
A market product grid, also known as the Ansoff Matrix or product-market expansion grid, is a strategic tool used by businesses to determine growth opportunities. The grid analyzes existing and new products, markets, and risks to identify potential strategic outcomes.
• Market Penetration
Market penetration involves introducing a new product to an existing market to achieve growth. This strategy focuses on increasing market share by attracting new customers or encouraging current customers to purchase more.
• Market Development
Market development involves expanding a business’s market to increase revenue. This strategy involves finding new markets for existing products or modifying existing products to meet the needs of new markets.
• Product Development
Product development involves creating new products to bring growth to an existing business. This strategy focuses on creating new products that appeal to existing customers or attract new customers.
• Diversification
Diversification involves growing a business by coming up with new products and markets. This strategy focuses on creating new products for new markets or expanding into new markets with existing products.
Using a market product grid can help businesses identify the best growth opportunities and develop effective strategies to achieve their goals.
Market Product Matrix: What’s The Point?
A Market Product Matrix is a useful tool for companies to determine how to sell their products and what risks they face. It is a framework used to relate the market segments of potential buyers to various product offerings or potential marketing actions. By using this matrix, businesses can identify where the best opportunities lie given their current situation.
The Best Way To Make A Market Product Grid?
To create a Market Product Grid, a company needs to identify two axes: the x-axis shows new products, and the y-axis shows existing markets. The company needs to determine how much they can spend and how much risk they are willing to take. By doing so, they can identify the best opportunities for their products.
1. Market Penetration:
Market penetration is the first step for strategic leaders. This approach involves gaining market share without exploring unexplored products or markets. The company’s scope does not change, and therefore, the risk is lower.
To increase market penetration, companies can use various strategies such as increasing advertising, lowering prices, or improving product quality. By doing so, they can attract more customers and gain more market share.
2. Product Development
When companies face increased competition or economic and legal restrictions, they might not be able to expand their market share. In such cases, they might decide to develop new products to reach their existing market. However, this strategy is riskier as it involves creating entirely new products, which can be expensive.
Product development can also require hiring new people and tools to create a new product. Therefore, it is a more costly strategy. However, it can be a good option for companies that want to expand their product offerings.
3. Market Development
Market development involves planning and customer research for an existing product. Companies can use this strategy to reach a new market by expanding to a new region, changing the price to attract new customers, or developing new distribution channels.
Market development is a less risky strategy as it involves selling an existing product to a new market. However, it requires careful planning and research to identify the best opportunities.
4. Diversification
Diversification is the riskiest strategy as it involves introducing new products to new markets. However, it can also offer the highest potential gains. By diversifying their product offerings and markets, companies can protect themselves from market fluctuations and changes in consumer preferences.
Diversification can be expensive in terms of research, marketing, and distribution. However, it can pay off ample if done correctly.
Overall, the Market Product Matrix is a useful tool for companies to identify the best opportunities for their products. By using this matrix, companies can determine the best strategies for market penetration, product development, market development, and diversification.
What’s Your Business’s Growth Strategy?
To determine a growth strategy for your business, consider using the product market grid. This tool helps leaders consider costs, risks, and the type of products and customers they have. Entering a new market can be challenging, but working with a manufacturer or distributor can help ease the burden. Starting a business is riskier than building one, and finding an industry that isn’t already competitive can be difficult. Therefore, it’s important to research and understand the market before making any moves.