11.08.2021

Marketing strategy vs. Ansoff matrix

Key information

  • Marketing strategy is a key element for company decision-making, taking into account the analysis of the external and internal environment.
  • Ansoff matrix is a tool for analyzing marketing strategies, indicating possible directions of development: market penetration, market development, product development and diversification.
  • The Z-strategy illustrates the dynamics of the company's development, passing through various stages in the Ansoff matrix.
  • A marketing strategy shows how to achieve business goals, rather than defining the goals themselves.
  • Developing and consistently executing a marketing strategy are key to achieving goals and increasing profits.

How do you unleash your innovation and rise above the competition? - There is probably no entrepreneur who has not asked himself such a question. Certainly, many of us would like to set up our own business, create the right conditions for its development and generate as much profit as possible. However, this task is not easy. This is because there are risks that arise from the often radical and unpredictable changes in the economic environment. To protect against it, it is necessary to determine the company's development directions based on a specific strategy. In practice, this means that a well-developed marketing strategy, understood as a set of certain guidelines and rules of conduct, should be the element that determines the company to make such and not other decisions.

Marketing strategy vs. marketing plan

According to the data of the report titled "Nationwide Survey of Marketing Strategy in Companies. The Impact of Marketing Strategy on Business." Half of the entrepreneurs in Poland do not distinguish between a marketing strategy and a marketing plan. These are worrying results, because marketing should be the strategic department of every company, setting the direction of development. It turns out that these concepts are confused and misunderstood even by people who deal with marketing on a daily basis - that is, marketing managers, who often manage multi-person teams or departments in their companies.

A marketing strategy defines the overall direction of a company's activities to achieve the goal of developing a competitive advantage for the company. A marketing plan, on the other hand, is a document containing specific actions and timelines to be taken to implement the marketing strategy. Although the two concepts are related, they differ in time horizon, level of detail and flexibility. A marketing strategy is long-term and less flexible, while a marketing plan is more detailed, short-term and easily adapted to changing market conditions. Both are crucial to effective marketing management and should be developed in a complementary manner.

Marketing strategy - what does it involve?

When creating a marketing strategy, we analyze all aspects of the company's operations, that is, both its external environment and internal environment. On this basis, all the problems of the company are determined and the best solutions are chosen from the point of view of the goals set.

A good strategy should define development directions based on such issues as:

  • The range of products and services produced,
  • The company's position in its target markets,
  • Influencing audiences and building a positive image,
  • Relationship to competitors and cooperating companies.

Depending on the factors that will become our driving force, we can talk about market-oriented strategy, i.e. aimed at satisfying customer needs and creating a market with certain characteristics desired by the company, and resource-oriented strategy, where the most important thing becomes the effective use of resources and strengthening the company's potential.

Application of the Ansoff Matrix

In order to choose a good strategy, it is important to consider which markets and to what extent we should focus our efforts. The very formation of a company's market field is based on two factors - product and market. In analyzing the relationship between these two variables, the Ansoff matrix is very helpful, which distinguishes four alternative groups of marketing strategies, resulting from the choice between existing and new target markets and products.

Ansoff matrix, or how to choose a good strategy?

Market penetration strategy

The strategy involves seeking to grow the company by taking advantage of opportunities to intensify its presence in existing markets by offering existing products. Thus, the main purpose of these activities is to increase purchases by regular customers and by new customers who previously were not interested in this type of product or preferred the products of competitors. This strategy is usually used in situations of high market saturation.

Market development strategy

In this strategy, the company's growth comes from increasing sales of existing products by entering new markets. This expansion means both going beyond the existing market in territorial terms, as well as conquering new industries and market segments where the company has not been present so far (e.g., by finding other ways to use products already in the company's portfolio).

Product development strategy

Based on this strategy, the company offers new or upgraded products in the same market. In this case, the possibilities for a company to act are very large, and depend primarily on its innovation. It is the introduction of innovations and various improvements, often insignificant, but which improve the quality or functionality of products, that causes an increase in interest from customers, which in turn contributes to an increase in sales.

Diversification strategy

This strategy involves a company entering new markets while offering new products, making it certainly one of the most expansive strategies. There are three types of diversification:

  • horizontal diversification (Horizontal) - means expanding the scope of the business by meeting completely new consumer needs and launching completely new products,
  • vertical diversification (vertical) - involves taking control of the entire production process and reducing the degree of dependence on suppliers and intermediaries,
  • parallel diversification - means getting involved in a completely new industry and thus partially changing the company's business profile.

It is also worth looking at the choice of marketing strategy from the point of view of the passage of time, after all, the goal of the activity of any enterprise is development, which requires a certain dynamism and often deciding to change previously taken actions. There are different ways to use the Ansoff matrix and thus different directions of company development. Many companies choose to penetrate in order to later be able to enter new markets, and then switch to a diversification strategy.

Another popular direction is the so-called "Z-Strategy," which means taking the following actions in sequence: market penetration, introduction of new products, entry into new markets, diversification. This strategy shows the "movement" of the company as it "moves" through the successive boxes of the matrix (taking a Z-shaped route), which indicates how the company adapts to changing conditions.

How to measure the effectiveness of a marketing strategy?

Inherent in the success of an enterprise is the notion of goals set and pursued by it. This statement can also be translated into the concept of marketing strategy. Undoubtedly, one of the most important measures of the success of a marketing strategy is the realization of the overriding purpose for which it is used, namely, the development of a competitive advantage in the market in which one operates or plans to operate.

However, it is important to remember that in addition to the overarching purpose for which I use marketing strategy, there are a number of objectives that a specific strategy can address. The objectives of a marketing strategy will vary from organization to organization, as they stem directly from the spectrum of tasks facing marketing in a given company and should be consistent with its mission and vision. These objectives can also be grouped, in a way that corresponds to specific types of marketing strategies, as they are closely related.

The key performance indicators - KPIs - often used by modern companies can be helpful in determining the degree to which a given goal is being met. These indicators are presented in numerical values that directly signal the degree of implementation of the applied strategy. At the same time, the indicators should address issues that are important to the entity. They should be adapted to the situation and the specifics of the sector in which the unit operates.

The number of indicators should not be too large, as measurement should focus on monitoring key processes rather than measuring all of them. Only those indicators should be selected whose results are really influenced by employees. Most indicators should focus on the processes of satisfying customers and measuring customer satisfaction. With these, the company can easily monitor the effectiveness of its efforts.

The success, or lack thereof, of the applied strategy can be resolved in the process of verifying whether the assumed levels of key performance indicators have been achieved.

The key to increasing profit?

It is worth noting that the marketing strategy does not define the goal of the company's activity itself, but should give an answer to the question of how to achieve it with optimal use of resources and incurring the lowest possible costs. Building and consistently executing a strategy appear to be crucial for the company to achieve its goals and expected level of growth.

The task is certainly not easy and you need to devote a lot of time and energy to it, but it is an investment in the future that will bring a return many times greater than the effort expended. So if your company has not yet developed a strategy, it is high time to change that. Get to work!

As ConQuest Consulting, we advise on various projects, including marketing strategies. See how we have helped our customers and sign up for free consultation By filling out the form below. We will be happy to tell you how we can help you.

 

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    Dariusz Wojdyga

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