Marketing Tools - Ansoff's Matrix

Ansoff's Matrix



The Ansoff Matrix is a strategic planning tool that provides a framework to help executives, senior managers and marketers devise strategies for future growth.



Market penetration
In market penetration strategy, the organisation tries to grow using its existing offerings (products and services) in existing markets.

• Advertise, to encourage more people within your existing market to choose your product, or to use more of it
• Introduce a loyalty scheme
• Special offer promotions
• Increase your sales force activities
• Buy a competitor company

Market developmentIn market development strategy, a firm tries to expand into new markets (geographies, countries etc.) using its existing products.

• Target different geographical markets at home or abroad
• Use different sales channels, such as online or direct sales if you are currently selling through the trade
• Target different groups of people, perhaps different age groups, genders or demographic profiles from your normal customers.

Product development

In product development strategy, a company tries to create new products and services targeted at its existing markets to achieve growth.

• Extend your product range by producing different variants, or packaging existing products it in new ways.
• Develop related products or services (for example, a toothpaste producer starts selling mouthwash).

Diversification

In diversification an organisation tries to grow their introducing new offerings in new markets. It is the most risky strategy since both product and market development is required.

There’s often little scope for using existing expertise or achieving economies of scale, because you are trying to sell completely different products or services to different customers.

Its main advantage is that if the new business fails, the other is unlikely to be affected.

Using the Marketing Mix: pricing

Pricing strategies.

These should include: price skimming and penetration, price leaders and price takers.

Pricing tactics

These should include: loss leaders and psychological pricing.

Influences on pricing decisions

How does a manufacturer decide how much to charge for a product? Link here.

An Indian man has bought one of the world's most expensive shirts, made with more than 3kg of gold and worth $250,000. Click on the picture.

Cost based pricing:

1. Cost plus pricing

A firm sets prices by working out variable costs, and overhead costs and then adding an amount to cover its profit goal. 

It is easy to work out.

The price  is the lowest acceptable price a firm can charge and attain an acceptable profit.

Price =  Total fixed costs + Total  variable costs  +  Desired  profit

                                              Units  produced

2. Mark-up pricing

A firm sets prices by working out the per-unit costs of producing (buying) goods and/or services and then determining the mark up percentages needed to cover selling costs and profit. It is most commonly used by wholesalers and retailers.

So if my product costs £12 to make & I want a 25% mark up:

£12 x .25 = £3

So… £12 + £3 = A selling price of £15