Product Development: How to Create a Market Product Grid?

Feb 06, 2024 Chapter 6. Selling

Are you looking to grow your business? You can do it all kinds of ways, but what’s the best one for your venture? Market product grid help companies visualize the risks of expansion and plot their growth strategies.

You can use it to make smart marketing, distribution, and product development choices. Harvard Business Review published it first. It’s now an essential part of business school curriculums everywhere. Get your growth strategy off the ground with this article about a market product grid.



What is a Market Product Grid?

The Ansoff Matrix or product-market expansion grid is also called a market product grid. You can use it to figure out how to grow your business. Grids look over existing and new products, markets, and risks.

There are four main categories of strategic outcomes on the market product grid:

• Market penetration: Growth comes from bringing a new product to an existing market.

• Market development: By expanding its market, a business makes money.

• Product development: New products bring growth to an existing business.

• Diversification: Businesses grow by coming up with new products and markets.



market product grid



Market Product Matrix: What’s The Point?

A Market product grid is framework used to relate the market segments of potential buyers to showing various products offerings or potential marketing action. 

In the plan, the company plans new and existing products, how to sell each, and what risks they face. If you don’t know what to do, a grid can help you.




How to Create a Market Product Grid?

Crafting a market product grid can be simplified into a two-axis model:

  • the x-axis representing products (both new and existing),
  • and the y-axis denoting markets (both new and existing).




To effectively utilize this matrix, business leaders must possess a solid comprehension of where the most promising opportunities exist relative to the company’s current standing. It’s essential to assess the available resources and determine the level of risk tolerance.

Typically, strategic leaders initiate their analysis from the market penetration quadrant, focusing on introducing existing products to existing markets. This quadrant serves as the most straightforward starting point for any company, aiming to capture a larger share of an established market.

This approach entails less risk as it doesn’t involve venturing into unfamiliar markets or products, maintaining the organization’s scope unchanged.

However, instances may arise where increased competition or economic and legal constraints hinder further market penetration. In such scenarios, companies may opt for product development, introducing new products to existing markets.

This strategy escalates the risk level by diversifying into new products while retaining the existing market base. Often, companies mitigate this risk by leveraging core technologies rather than developing entirely new products, although it may require additional investment in talent and tools.

Alternatively, some companies prefer a market development approach over product development. Market development involves introducing existing products to new markets, necessitating thorough planning and customer research.

However, this approach can be simplified by:

  • Expanding into new geographical areas.
  • Implementing new pricing strategies to attract a new customer base.
  • Developing new distribution channels.


Finally, the most daring growth strategy entails full diversification: introducing new products to new markets. While this carries significant risk, the potential rewards can be substantial. Diversification acts as a safeguard against economic volatility, protecting the company when a market falters or a product becomes obsolete.

Although diversification demands substantial investments in research, distribution, and marketing, the payoff can be substantial.




What are the Four Product Market Expansion Grid Strategies?

A market product grid is simply two axes: the x-axis shows new products, and the y-axis shows existing markets. Businesses need to know where the best opportunities lie, given where they are right now, if they want to make good use of the matrix. Determine how much you can spend and how much risk you’re willing to take.


1. Market Penetration:

Market penetration’s usually marketing penetration that’s the first step for strategic leaders. Companies start here because it’s obvious: it’s about gaining market share. The company doesn’t have to explore unexplored products or markets with this approach.

Therefore, the risk is lower because essentially the organization’s scope doesn’t change.”


2. Product Development

Some companies can’t expand their market share because of increased competition, economics, or laws. A company might decide to develop new products as a way to reach a market it already has.

But that’s a riskier strategy. When you diversify into new products without moving into new markets, you minimize the risk of your company’s core technology because you’re not creating entirely new products. Additionally, people and tools may need to be hired to create a new product, so this strategy is more costly.


3. Market Development

It’s more common for companies to focus on market development rather than product development. Market development involves planning and customer research for an existing product. It doesn’t have to be so hard. A new market can be reached by:
• Expanding to a new region;
• Changing the price to attract new customers;
• You could also develop new distribution channels.


4. Diversification

In the end, full diversification is probably the riskiest strategy: introducing new products to new markets. But potential gains can make this risk worthwhile.

A business’s immune system won’t get wiped out when a market goes down or a product goes out of style. Diversification may be the most expensive in terms of research, marketing, and distribution, but it can pay off ample.




What’s Your Business’s Growth Strategy?

Determining the right growth strategy for your business requires careful consideration. A product market grid serves as a valuable tool in this regard, but it’s crucial to factor in costs, risk, and the nature of your products or customers.

Collaborating with manufacturing or distribution partners can help ease the burden of expanding into new markets.

Additionally, mature businesses may have different risk tolerances compared to startups, and navigating fiercely competitive industries requires thorough market research.

You’ll be able to figure out your growth strategy using the product market grid. Leaders need to consider costs, risks, and their type of products and customers. We can help ease the burden of entering a new market with the help of a manufacturer or distributor.

Starting a business is riskier than building one, and it can be tough to find a place that isn’t already very competitive, depending on your industry. Find out what the market looks like.

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