What is Product-Market Grid
The product market grid is a tool for the consideration of which growth strategy the company can be used in the future. The product-market grid shows you four strategies based on the target market and product including market penetration, product development, market development, and diversification.
The company needs to research and analyze the current market situation and the product’s opportunities to determine what is the best strategy that rewards the greatest growth opportunity at the lowest risk.
- Market penetration is focused on selling more existing products to existing markets.
- Product development is focused on selling new products to existing markets.
- Market development is focused on selling existing products to new markets.
- Diversification is focused on selling new products to new markets.
The product-market grid was developed by Igor Ansoff the Russian American mathematician and published in his 1957 paper “Strategies for diversification”. Harvard Business Review, Vol. 35. The product market grid is also known as the Ansoff matrix and the product-market expansion grid.
Market Penetration
Market penetration strategies focus on selling more existing products to existing customers or finding new customers within the existing markets. The market penetration strategy often involves encouraging current customers to buy more. These are the target of the market penetration strategy:
- Increase market share.
- Increase buyers frequently.
- Encourage customers to buy more with promotions.
- Acquisition of a rival in this market.
The market penetration strategy is the easiest and the least risky growth strategy among the 4 strategies of the product-market grid because selling the existing products to existing customers is much easier and lower risk than developing a new market.
Product Development
Product development strategies focus on creating a new product to sell in the existing markets to achieve growth. The success of the product development strategy depends on the company’s ability to find an unmet the satisfy needs of the existing customers to fulfill.
The product development strategy is riskier than the market development but this strategy has an advantage on the customers’ trust and the relationship between the existing customers and the brand. This advantage helps the company a lot to make the customer easily go through the product adoption process and adopt the product.
Market Development
Market development strategies focus on selling existing products to the new market. Using this strategy the company needs to acquire new customers in different gender, ages, region, or country.
However, market development is riskier than product development and product penetration because to find new customers the company needs to do heavy research as creating a new product. To achieve success the company needs to make the new customers need to be taken through the product adoption process to adopt the product.
Diversification
Diversification strategies focused on developing new products to sell in the new market. The product may be related or unrelated to the existing products. Other than that, the diversification strategy also includes the acquisition of other companies in a different market.
This is the highest risk strategy in the product market grid to implement but highest reward in exchange. Diversification strategy is equal to start to a new business since the company needs to develop a new product and research for a new market.
Frequently Asked Questions
The product market grid is a strategic tool for the company to choose the right growth strategy. The product-market grid shows you four strategies based on the market and product including market penetration, product development, market development, and diversification.
The product-market grid shows you four strategies based on the market and product including market penetration, product development, market development, and diversification.
