The Ansoff matrix is a 2x2 grid that sets your products (existing or new) against your markets (existing or new) to give four growth strategies: market penetration, market development, product development and diversification. The further you move from what you already sell to who you already sell to, the more risk you take on.
CFI says the matrix was developed by H. Igor Ansoff, an applied mathematician and business manager, and published in the Harvard Business Review in 1957. Shopify gives the article's title as Strategies for Diversification. CFI describes it as a way to judge how attractive each growth strategy is and how much risk it carries.
How the Ansoff grid works
CFI puts Products on the X-axis and Markets on the Y-axis. A market can mean a geography, such as North America, or a customer segment. Shopify explains the risk pattern: it rises as you move diagonally from the top left (market penetration) to the bottom right (diversification), because new products and new markets mean more investment, more uncertainty and more organisational change.
| Strategy | Products and markets | Risk | Example from the sources |
|---|---|---|---|
| Market penetration | Existing product, existing market | Lowest | A loyalty scheme, or a pricing deal for more shelf space |
| Market development | Existing product, new market | Low to medium | Lululemon into Asia Pacific; a store translated for new countries |
| Product development | New product, existing market | Medium | Hedley & Bennett tools tested with chefs |
| Diversification | New product, new market | Highest | A shoe maker into car seats (related) or packaged goods (unrelated) |
The four Ansoff growth strategies
1. Market penetration
Sell more of what you already have to the market you already serve. CFI lists the usual tactics as more marketing, streamlined distribution or lower prices. Its example is a packaged-goods business that adjusts pricing for a large grocery chain to win extra shelf space, including for its pet food lines. Shopify says this is usually the lowest-risk option and suggests ideas such as a points-based rewards programme or an email-only Buy One, Get One 50% Off sale.
2. Market development
Take an existing product to a new market. CFI says it's the next least risky option because it doesn't need significant R&D, and approaches include going after a different customer segment or demographic. CFI's example is Lululemon expanding into Asia Pacific with athleisure products that were already popular. Shopify's example is a US-only boutique that translates its site into Spanish and French, adds local payment gateways and runs a targeted Instagram campaign.
3. Product development
Build something new for the customers you already have. CFI calls this a play on brand loyalty and share of wallet, and says approaches include acquiring the rights to another firm's product or branding a white-label product made by a third party. Shopify's example is Hedley & Bennett, which moved beyond aprons by testing 3D-printed tool designs with chefs in professional kitchens.
4. Diversification
New product, new market. CFI says this is generally the highest-risk strategy because you need product development and market development at the same time, though it can bring new revenue or reduce reliance on a single business.
The catch: related and unrelated diversification aren't the same bet
Most summaries treat diversification as one box. CFI splits it in two, and the difference matters:
- Related diversification has potential synergies. CFI's example is a leather shoe maker producing leather car seats: same material, same skills, new product and new buyer.
- Unrelated diversification has none. The same shoe maker entering consumer packaged goods, to reduce its reliance on a cyclical high-end shoe business, shares almost nothing with what it already does.
The other thing to remember is that Ansoff ranks risk, not reward. It tells you which move is riskier. It doesn't tell you which is better. That's what the numbers are for.
How to use the Ansoff matrix in four steps
CFI's process is short:
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- Draw the 2x2, with products across and markets up.
- List your growth ideas and place each one in a quadrant, depending on whether the product and the market are existing or new.
- Compare options within each quadrant and across quadrants, for risk and size.
- Test the shortlist in a financial model before you commit.
Once you've picked a move, it needs a plan behind it, and my marketing plan template is a simple place to start. If you're weighing a new segment for market development, these market research tools help you size it first.
Ansoff vs the BCG matrix and other frameworks
CFI draws a neat line between the two most famous grids. Ansoff plans where future growth will come from, meaning which products go into which markets, while the BCG matrix assesses the products or business units you already have by market growth and relative market share. CFI also says Ansoff is often used alongside PESTEL, SWOT and Porter's five forces.
Where I come in
I help SaaS marketing teams and small businesses decide the next growth move: whether there's more to win from current customers, which new segment is worth testing and what marketing each option needs. You can see how I work on my work with me page.
The verdict on the Ansoff matrix
Start at the low-risk corner. Most small businesses haven't finished market penetration, getting more from the customers and markets they already have, before they start chasing diversification. Work your way out from there, and when you do diversify, know whether it's the related kind or the unrelated kind.
Frequently asked questions
What are the four strategies in the Ansoff matrix?
Market penetration, market development, product development and diversification.
Which Ansoff strategy is the riskiest?
Diversification. CFI says it's generally the highest-risk strategy because it needs both product development and market development.
Which Ansoff strategy is the least risky?
Market penetration, selling more of your existing products into your existing markets. Shopify says it's usually the lowest-risk option.
Who created the Ansoff matrix?
H. Igor Ansoff, an applied mathematician and business manager. CFI says it was published in the Harvard Business Review in 1957.
