Four Business Builders Your Company Must Know About
Chances are you’ve never heard of H. Igor Ansoff. That’s OK, for many years I hadn’t heard of him either. He is commonly known as the “father of Strategic Management.” If you implement his business theories, it just might make the difference in the future success or failure of your small business.
One of his theories, the “Product – Market Growth Matrix,” is a tool for growing your business using current and new products to current and new customers. I know that sounds simplistic but let’s look a little deeper as to how you can use these strategies to grow your bottom line.
The Ansoff matrix consists of four business strategies using current marketing and performance information. Each part of the matrix uses information that is currently known combined with information projections into the future. I’ll explain each one then sum up at the end of the post. The first is …
This is a market where there are currently existing customers’ already using existing products. Your job is to increase your current market share. So how would you attack this market? Well, electric cars would be a good example. You already have cars and drivers but you also have a growing market of environmentally conscious consumers.
Using this example, you can develop a new market with less competition. Look at your existing products and customers. Is there any product line you carry that can adapt to a new customer base or customers who can use your products in a new way?
In this strategy, there are existing customers in need of new products. Apple is superb at doing this. A computer company that was on life support used their computer technology to branch out into iPhones, iPads, and other communication products to become a very desirable stock investment.
McDonald’s would be another good example. They don’t live and die with the Big Mac. There are always looking for the next “Egg McMuffin” profit center. They have recently added heart healthy oatmeal with fruit to their morning menu. What new products or spin offs of your products or services can you offer to your existing customer base?
This is the opposite of Product Development. Here we have products but need new customers. When a person reaches the age of 16, in most states, they are a new driver. They are now an oil change customer; tire customer, car wash customer, auto repair customer, and gasoline customer. The point is that new customers enter your markets all the time. The question is, are you both identifying who they are and are you reaching them with economical marketing and advertising? Take an objective look at your products. Are you missing any groups of people that you can develop into future customers?
This last one is the toughest and most expensive but if done correctly it can produce big results and big profits. This strategy is used to introduce new products to new customers. The biggest mistake business owners using this strategy make is to try to capitalize on an existing name or product. Please don’t fall into this trap. There are no “Betty Crocker Tires” or “Pennzoil Cake Mix.”
Procter & Gamble are experts at not making this mistake. Most of their brands have been number one brands since the 1920’s. Tide has been the big seller in laundry but P&G didn’t make Tide for Dishes… they introduced Cascade.
The best example I can think of for this strategy would be… the Hula Hoop. How many people needed a Hula Hoop the day before it came out? Answer: No one. Yet it was a marketing phenomenon and still sells well today. The Frisbee out sells baseballs, basketballs, and footballs combined. As I said, if you have a better mousetrap the world will beat a path to your door but only if they know where that door is.
Some Final Thoughts
Many businesses will be able to use one of more of these strategies. Some will use them all. The lesson to take away is that customers like to deal with people they know. If you can market new products to existing customers, that will be the most economical market to build. Think Apple. Your existing customers already know and trust you. New products to new customers, on the other hand, will be the hardest but might have the biggest payoff. Think Hula Hoop. However, using this strategy will require spending some bucks to introduce the product and build the value of having it.
Put yourself in your customer’s shoes and ask, “What’s in it for me?” Answer that question and the money will follow.