A useful planning tool according of market segments and products is the matrix developed by Igor Ansoff (H Igor Ansoff, 1918-2002), who is deemed by some as the 'Daddy of Strategic Management'. Totally entitled the Ansoff Product-Market Growth Matrix, the tool was first shared in Harvard Business Review, 1957, in Ansoff's newspaper Approaches for Diversification.
The Ansoff product-market matrix really helps to understand and determine marketing or business development strategy. Any business, or part of your business can pick which technique to utilize, or which mix of strategic options to utilize.
This is a fundamentally simple and effective way of taking a look at proper development options.
existing products
new products
existing markets
market penetration
product development
new markets
market development
diversification
Each of these strategic options contains different opportunities and downsides for different organizations, just what exactly is right for just one business won't necessarily be right for another. Think about what option offers the best prospect of your own business and market. Think about the talents of your business and what type of growth strategy your advantages will allow most obviously. Generally beware of diversification - this is, by its aspect, unknown territory, and carries the best risk of inability.
Here will be the Ansoff strategies in conclusion:
Market penetration - Producing your sales of existing products to your existing market(s). That is fine if there is plenty of market show to be enjoyed at the expense of your competition, or if the marketplace keeps growing fast and large enough for the growth you need. In case you curently have large market talk about you need to consider whether trading for further growth in this area would produce diminishing profits from your development activity. It could be that you will increase the benefit from this activity more by lowering costs than by actively seeking more market talk about. Strong market show suggests there will tend to be better earnings from extending the range of products/services that you can offer to the marketplace, as in the next option.
Product development - Expanding or finding services to take to your existing market(s). That is a nice-looking strategy if you have strong market talk about in a particular market. Such a strategy can be considered a suitable reason behind acquiring another company or product/service capacity provided it is pertinent to your market and your distribution route. Expanding new products would not mean that you have to do this yourself (which is normally very expensive and sometimes results in simply re-inventing someone else's steering wheel) - often there are potential creation lovers out there who want for his or her own distribution partner with the type of market occurrence that you already have. However if you already have good market show across an array of products for your market, this program may be the one which produces diminishing earnings on your progress investment and activities, and instead you may do easier to seek to build up new market segments, as in the next proper option.
Market development - Growing new market segments for your existing products. New markets can also signify new sub-sectors inside your market - it helps to stay fairly near the markets you know and which know you. Getting into completely different markets, even if the product/service fit looks good, holds risks because this will be unfamiliar place for you, and almost certainly will involve working through new syndication programs, routes or partners. If you have good market talk about and good product/service range then moving into associated markets or segments is likely to be an attractive strategy.
Diversification - taking services into new market segments. This is high risk - not only do you not know the products, but neither do you know the new market(s), and again this strategic option will probably entail working through new distribution stations and routes to market. This sort of activity should generally be thought to be additional and supplementary to the primary business activity, and really should be rolled out carefully through rigorous tests and piloting.
Consider also your existing products and services themselves in conditions with their market development opportunity and earnings potential. Some will offer you very high margins because they're relatively new, or specialised for some reason, perhaps because of special circulation preparations. Other products and services may become more mature, with little if any competitive advantage, in which case they will produce lower margins. The Boston Matrix is a useful way to comprehend and evaluate your different existing product and service opportunities:
boston matrix model - product/service develeopment
The Boston Matrix model is a tool for evaluating existing and development products in conditions of the market probable, and in doing so implying strategic action for products and services in each category.
low market share
high market share
growing market
problem child
(rising) star
mature market
dog
cash cow
Cash cow - The rather crude metaphor is dependant on the idea of 'milking' the comes back from previous opportunities which established good distribution and market talk about for the merchandise. Products in this quadrant need maintenance and cover activity, together with good cost management, not growth effort, because there is little or no additional expansion available.
Dog - That is any service or product of yours which includes low market existence in a mature or stagnant market. There is absolutely no point in expanding products or services in this quadrant. Many organizations discontinue products/services that they consider get caught in this category, in which particular case consider potential effect on overhead cost restoration. Businesses that have been starved or rejected development find themselves with a higher or entire percentage of their products or services in this quadrant, which is actually not very funny whatsoever, except to the competitors.
Problem child - They are products that have a huge and growing market probable, but existing low market share, normally because they're new products, or the application form is not spotted and acted after yet. New business development and job management principles are needed here to ensure these products' probable can be realised and disasters avoided. This is apt to be an area of business that is quite competitive, where in fact the pioneers take the hazards in the expectation of obtaining good early syndication agreements, image, reputation and market talk about. Gross profit margins will tend to be high, but overheads, in the form of costs of research, development, advertising, market education, and low economies of size, are normally high, and can cause first business development in this field to be loss-making before product moves in to the rising legend category, which is by no means reassured - many problem children products continue to be so.
rising star - Or 'star' products, are those which have good market talk about in a solid and growing market. As a product goes into this category it is commonly known as a 'rising star'. Whenever a market is strong and still growing, competition is not yet completely established. Demand is strong; saturation or over-supply do not is accessible, and so pricing is relatively unhindered. This all means that these products produce very good results and profitability. The market is receptive and informed, which optimises providing efficiencies and margins. Creation and making overheads are established and costs minimised due to high quantities and good economies of scale. They are great products and worth continuing investment provided good growth potential is constantly on the exist. When it generally does not these products will probably move down to cash cow status, and the business will need the next increasing stars developing from its problem children.
After considering your business in conditions of the Ansoff matrix and Boston matrix (which are thinking aids as much as anything else, not really a special solution in themselves), on a more in depth level, and for many businesses just as significant as the Ansoff-type-options, what is the importance of your major accounts - do they offer better opportunity for growth and development than your ordinary business? Do you have a superior quality, specialised offering that provides better business gain on a big scale instead of small level? Are your offering costs and investment similar for large and small deals? If so you might do better concentrating on growing large major accounts business, alternatively than taking a sophisticated product or service treatment for smaller companies which do not appreciate or require it, and cost you just as much to sell to as a big organization.
Customer Matrix:-
This customer matrix model can be used by many companies to understand and determine strategies matching to customer types.
good products
not so excellent products
good customers
develop and discover more customers like these - allocate your very best resources to these existing customers and to prospective customers matching this profile
educate and convert these customers to good products if good for them, failing which, maintain customers via consideration management
not so excellent customers
invest cautiously to develop and improve marriage, faltering which, maintain customers via account management
assess feasibility of moving these customers left or up, faltering which, withdraw from offering sensitively
Assessing product type is helped by mention of the Boston matrix model. There's a lot of flexibility in regards to what constitutes 'good' and 'not so excellent customers' - use your own standards. A sensible way to do that is to devise your own grading system using requirements which means that something to your own situation. Typical requirements are: size, location, relationship, credit-rating and repayment terms, is the client growing (or not), the security of the resource contract, the service and support overhead required, etc. This kind of customer profiling tool and exercise is often forgotten, but it is a crucial aspect of marketing and sales development, and of optimising sales efficiency and business development performance and profitability. Each quadrant takes a different sales strategy. The sort of customer also implies the type of sales person who should be in charge of managing the relationship. A firm view must be taken before committing expensive field-based sales resources to 'not so good' customers. Target prospect development (determining and calling new prospective customers) on the account which looks in the top remaining quadrant. Identify possible clients who fit this account, and allocate your business development resources (people and advertising) to this audience.
Consider also What are your competitor weaknesses in terms of sectors, physical territory and products or services, and exactly how might these factors influence your options? Use for examining each competitor as well as your own group or section.
Many organizations concern a marketing budget from the very best down (a budget released by the Centre/HQ/Fund Director), as they say, in which particular case, what's your marketing budget and how will you use it to create the best return on investment, and to help the business better to meet its overall business goals? Use the models explained here to determine your best likely comes back on marketing investment.
The best way to begin to model and plan your marketing is to have a record of your historical (say last year's) sales results (including advertising and advertising costs if appropriate and available) on a spreadsheet. The level of detail is up to you; modern spreadsheets can set up massive levels of data and make very complex examination quick easy. Data is vital and will enable anyone to do most of the analysis you will need for marketing planning. In simple terms you may use previous year's results as a basis for planning and modelling another year's sales, and the marketing expenses and activities required to achieve them.
Simple business plan or sales plan tools illustrations:-
These templates good examples help the planning process. Divide and analyse your business or sales relating to your main products/services (or income streams) based on the profit motorists or 'levers' (variables that you can change which affect profit), eg. , volume or amount, average sales value or price, % gross margin or revenue. Add different columns which echo your own business earnings drivers or levers, and also to supply the most relevant options.
quantity
total sales value
average value
% gross margin
total sales or gross margin
product 1
product 2
product 3
product 4
totals
Do the same for each and every essential requirement of your business, for example, divide by market sector (or segment):
quantity
total sales value
average value
% gross margin
total sales or gross margin
sector 1
sector 2
sector 3
sector 4
totals
And, for example, separated by distributor (or path to market):
quantity
total sales value
average value
% gross margin
total sales or gross margin
distributor 1
distributor 2
distributor 3
distributor 4
totals
These simple split research tools are an exceptionally effective way to plan your sales and business. Develop an operating spreadsheet so that the bottom-right cell shows the total sales or gross margin, or profit, whatever you need to measure, and by changing the results within the break up (altering the mixture, average prices, quantities, etc) you can perform 'what if?' research to build up the best strategies.
If you are a competent dealing with spreadsheets it is normally possible to assemble all of this data onto an individual spreadsheet and then show different analyses by sorting and graphing according to different domains.
When you are happy with the overall totals for the year, convert this into a phased monthly plan, with as many lines and columns as you need and work for the business. Develop this spreadsheet by demonstrating inputs as well as sales outputs - the quantifiable activity (for example, the amounts of enquiries necessary to produce the planned sales levels) necessary to produce the organized performance. Large businesses need comprehensive and multiple page spreadsheets. A business plan needs costs as well as sales, and will show income as well as revenue and gross margin, but the basic principle is the same: plan the detailed numbers and prices of what the business enterprise performance will be, and what inputs are required for including these factors and financials into a more formal phased business trading plan, which also functions as a company forecasting and reporting tool too. Adapt it to suit your purposes. This course of action example is also available as a PDF, see The volumes could be anything: ten times less, ten times more, a hundred times more - the process is the same.
Consider also indirect activities that affect sales and business levels, such as customer support. Identify key performance indications here too, such as customer complaints response and resolution levels and timescales. Internal lead referral schemes, tactical collaboration activity; the performance of other direct sales activities such as sales firms, distributorships, export activities, licensing, etc. These performance factors won't normally show up on a company plan spreadsheet, but a separate plan should be produced for them, often they won't happen.
