If you want to make more money from your business, you might think that means finding more customers to sell to. But that’s only one way to do it. Not sure what your other options are? Enter the product/market matrix: a handy way to understand your options for expanding your business.
What is the product/market matrix?
The product/market matrix is a simple tool that helps you think about how to expand your business. It shows your options for growth based on four different combinations of products and markets. It also ranks these options according to risk. It is a handy framework to kickstart your expansion strategy. This is what it looks like.
According to the product/market matrix, you can:
- sell more of your existing products to existing customers (market penetration)
- sell existing products to new markets (market development)
- sell new products to existing customers (product development)
- sell new products to new customers (diversification)
Sell more of your existing products to existing customers
Acquiring new customers costs more than selling to your existing customers. So it makes sense to try to get your current customers to buy more. There are lots of ways to do this, for example:
- Implementing special offers to increase sales, such as three-for-two offers
- Introducing a customer loyalty scheme to encourage repeat custom
If you have data on your sales to date, use it to work out which market segments spend the most and target your marketing at them to maximise your ROI.
For example, if your most profitable market is people aged 65+, it makes sense to expand your business to service their needs rather than sticking with under 30s.
Sell your existing products to new markets
New markets are an exciting prospect. You know what you’re selling works, so why not introduce it to new audiences? There are two main options for finding new markets: geographic and demographic.
Geographic expansion might mean opening a second location for your business or just reaching out to audiences in a wider geographic area. It could even mean exploring international opportunities and exporting abroad. When you plan to expand into a new market, you’ll need to conduct market research to assess the demand there. Then you’ll need to invest in marketing to establish brand awareness and market share.
Don’t forget the digital landscape too. Expanding to online sales can open up a whole world of opportunities.
Demographic expansion means finding new types of user for your product. Lucozade is a great example of demographic expansion. Once a tonic for sickly children, it is now a leading sports hydration and energy drink brand.
Sell new products to existing customers
If you have an established customer base, introducing new products or services to meet their needs could be a profitable strategy. The key is knowing what to introduce.
Think about products and services that complement your current offer and that will be attractive to your existing audience.
For example, an organic deli might consider introducing ethical accessories like bags and jewellery, whereas a bike shop might decide to start stocking skateboarding products too.
Market research will help you work out whether there’s a demand for your proposed product. You can also sneak a peek at your competitors and see what they’re offering.
If you’re planning on manufacturing a new product, you’ll need to conduct thorough research to test your concept and refine it before launching into mass production.
Sell new products to new customers
Many people think that just introducing a new service or product is diversification. But in this context, diversification actually means introducing new products in new markets.
As you can imagine, this is considered the riskiest of the four growth strategies.
It needs market research into the viability of new products in new markets, and will potentially require you to invest in new equipment, facilities and skilled staff. However, it still offers benefits, because it allows businesses to spread the risk across different industries. If your current business sector is contracting, it might provide a bridge to a more future-proof sector.
A good example of diversification is Virgin, who began in music and are now an international household name in travel and leisure, telecoms and media, music and entertainment; financial services; and health and wellbeing.
Diversification takes considerable resources and energy. If you want to pursue this growth strategy, you’ll need to be extremely careful that your current business doesn’t suffer as a result of your new focus.
If any of these options appeal to you, you might need business finance to fuel your company growth plans. Transmit Growth Loans offer between £25,000 and £250,000 to fund the expansion of eligible businesses. Check out your eligibility on the Transmit Growth Loans website.