How to Use the Ansoff Growth Matrix for Business Success

In this article

If you want to expand and grow your business, you need to rely on the right tools. The Ansoff Growth Matrix is a simple yet powerful method that can help you evaluate your challenges and opportunities and come up with strategies that promote business growth.

In this article, you will learn how to apply the Ansoff Growth Matrix, what its pros and cons are, and how to implement the tool in your business.

The Ansoff Growth Matrix: Definition

The Ansoff Growth Matrix, also called the Product or Market Expansion Grid, is a framework invented by Igor Ansoff. He was a Russian-American mathematician and one of the fathers of strategic management.

The main application of this tool is to assess risks and opportunities connected to different business growth strategies.

Here is how it looks:

The matrix is divided into four sections:

• Market penetration. Suggests you increase market share within existing markets using existing products.
• Product development. Proposes you create new products for current markets.
• Market development. Suggests you enter new markets with existing products.
• Diversification. Proposes you launch new products into new markets.

Each matrix quadrant represents a unique growth path, becoming riskier from top left to bottom right.

This framework can be used alongside planning and risk assessment tools such as PEST, Five Forces, 7S, etc.

The four growth strategies of the Ansoff Matrix

Now let's look at each strategy in more detail.

Market penetration

According to Ansoff, this is the least risky strategy, so it comes first. It suggests that the easiest way to earn more is to sell more in the markets you're already working in. However, this is controversial.

He first described his matrix in 1957, and even then, he pointed out that in industrial markets such as B2B, for example, this strategy might be more challenging to implement. Since then, the market has evolved and become oversaturated. So it may be, in fact, one of the hardest strategies to implement.

Market penetration is a strategy that often requires significant financial resources to succeed. Since you're staying in an already established market with existing competitors, the primary ways to gain market share involve higher spending on marketing, pricing adjustments, and strategic acquisitions—all of which demand capital.

In a saturated market, customer acquisition costs (CAC) are always high because competitors fight for the same audience.

Here are the common tactics to achieve higher market penetration:

• Increasing marketing efforts to reach a wider audience;
• Investing in faster distribution channels;
• Decreasing prices;
• Acquiring a competitor to reduce competition.

For example, Amazon became a leader in e-commerce because it provided a great user experience. The website was easy to use, the delivery was fast, and the prices were relatively low. All of that required constant investments. Those efforts have allowed the company to deepen its market share in existing markets.

However, it was also one of the first of its kind, which might have played a role in the company's success.

Market development

This strategy suggests that you push your product into new markets. This carries certain risks―foreign markets may already have established players in your niche. Moreover, cultural differences may impact how your business is perceived.

Breaking into a new market isn't just a game of "translate and go"—it's about full-blown localization. Companies often underestimate how much it takes to truly fit in. It's not just about swapping words; it's about understanding cultural quirks, navigating local regulations, and adapting to how people actually use your product.

Here are some market development tactics:

• Entering a new region within your country;
• Entering a foreign market;
• Catering your product to a different demographic.

One great example is Wix. In 2015, Wix discovered that its name had an unintended meaning in German —"masturbation"— but initially did nothing about it. Later, the company embraced the double meaning, launching a marketing campaign in Germany with humorous billboards and a website playing on the word. This situation highlights that it's important to be aware of the cultural differences in global marketing.

Product development

Another way to gain new clients and new sources of income is by developing completely new products. This strategy may be effective, but it is high-risk.

Product Development is perfect for brands with loyal customers hungry for new features, and fast-moving industries where innovation isn't optional—it's survival. Subscription-based SaaS can use it to boost LTV, while startups can outmaneuver bigger competitors by launching new products fast.

Here are some product development tactics:

• Investing in research and development of a new product;
• Acquiring rights to produce another company's product;
• Creating a new offering by white-labeling third-party solutions.

Today, many SaaS businesses recognize the need to offer enhanced integrations—such as a seamless connection with popular tools like Slack, Trello, and Google Workspace—without investing heavily in new product development.

Diversification

When you choose diversification as your business strategy, you work with product innovation and expand into new markets. This can unlock a new revenue stream or reduce your company's dependence on a single product or market. But at the same time, you don't have any support system, such as an existing customer base or market share.

Diversification can happen in one of two ways:

• Related diversification. Occurs when the new product or market shares something with the existing business: expertise, tech stack, or team.
• Unrelated diversification. Involves entering a completely different industry or market where no significant overlaps exist between the new and existing business.

Google has diversified its business into numerous areas such as search engine, online advertising, YouTube, cloud computing, artificial intelligence, and even autonomous vehicles through Waymo. It has also established a strong presence internationally. With such a broad portfolio, they don't need to rely on any single revenue source.

Ansoff Matrix Examples: Real Companies

The strategies above may sound abstract, so let's ground them with concrete examples across different industries and company sizes. Each example maps to one of the four quadrants.

Spotify — Market Penetration

Spotify already dominates the music streaming market, but it continues to grow within that same space. Its tactics include aggressive free-tier offerings to pull users away from competitors, personalized playlists (like Discover Weekly and Wrapped) that drive engagement, podcast exclusives that increase time-on-platform, and family and student discount plans that reduce churn and expand account coverage. Spotify isn't inventing a new product or entering a new market—it's squeezing more value out of the one it already owns.

Uber — Market Development

Uber started as a ride-hailing service in San Francisco. Its market development strategy was straightforward: take the same product and launch it in city after city, country after country. The service itself didn't change much—the app, the driver model, the pricing logic remained largely the same. What changed was the market: new cities, new countries, new regulatory environments. By 2026, Uber operates in over 70 countries. The core lesson: if your product works in one geography, market development is about adapting the go-to-market motion (localization, compliance, local partnerships), not the product.

Apple — Product Development

Apple is a textbook case of product development done right. The company serves largely the same customer base—tech-savvy consumers willing to pay a premium—but continually introduces new products for them: iPhone, iPad, Apple Watch, AirPods, Vision Pro. Each new product deepens the customer's investment in the Apple ecosystem. For SaaS companies, the parallel is clear: adding new features, modules, or adjacent products for your existing users (like offering integrations, analytics dashboards, or AI-powered tools) is a product development play.

Amazon — Diversification

Amazon started as an online bookstore. Today, it's an e-commerce platform, a cloud computing giant (AWS), a content studio (Prime Video), a hardware manufacturer (Kindle, Echo, Ring), a grocery chain (Whole Foods), and a healthcare provider (Amazon Pharmacy). AWS alone generates more profit than all of Amazon's retail operations combined. This is unrelated diversification at scale: entirely new products in entirely new markets, funded by the cash flow from the core business. It's the highest-risk quadrant, and only a handful of companies have the resources and execution capability to pull it off across multiple verticals.

What SaaS companies can learn

Most SaaS businesses won't diversify like Amazon, but the framework still applies. A typical growth trajectory looks like this: start with market penetration (optimize onboarding, improve conversion, reduce churn), move to market development (expand internationally or target a new segment), layer in product development (add features, integrations, or new modules), and only consider diversification when the core business is generating stable cash flow and the team has bandwidth for entirely new ventures.

Ansoff Matrix: Pros and Cons

The Ansoff Matrix has been around since 1957, and its longevity speaks to its usefulness. But no framework is perfect. Here's a balanced look at what it does well—and where it falls short.

Pros

Simple and easy to communicate. The 2×2 grid is intuitive enough that anyone on the team—from C-suite to junior PMs—can understand it in minutes. It's an excellent tool for boardroom discussions, strategy workshops, and investor presentations. You don't need a consulting degree to explain it.

Forces structured thinking about growth. Without a framework, growth discussions often devolve into scattered ideas. The Ansoff Matrix channels brainstorming into four clear directions, making it easier to compare options and spot gaps. It's particularly useful when a leadership team is stuck debating where to invest next.

Makes risk visible. The matrix explicitly ranks strategies by risk level—from market penetration (lowest) to diversification (highest). This helps decision-makers align their ambition with their risk tolerance and resource capacity. For a startup with limited runway, knowing that diversification is the riskiest path is genuinely useful context.

Works across industries and company sizes. Whether you're a 10-person SaaS startup deciding whether to add integrations or a multinational evaluating a new market entry, the framework applies. Its generality is a feature, not a bug—it adapts to the context you bring to it.

Cons

Oversimplifies complex decisions. Real growth strategies rarely fit neatly into one quadrant. Is launching your existing product in a new vertical "market development" or "product development" if you need to adapt the product for that vertical? The boundaries are blurry, and the matrix doesn't help you navigate the gray areas.

Ignores competitive dynamics. The matrix focuses entirely on your own products and markets. It says nothing about what competitors are doing, how they'll react to your moves, or whether the market opportunity actually exists. You can have a perfect market development strategy on paper and still fail because a well-funded competitor got there first.

Doesn't account for execution difficulty. Two strategies might sit in the same quadrant but differ wildly in execution complexity. Entering Canada from the US (market development) is very different from entering Japan—but the matrix treats both the same.

Static by nature. The Ansoff Matrix captures a moment in time. Markets shift, customer needs evolve, and competitive landscapes change. A strategy that made sense in Q1 might be outdated by Q3. The framework doesn't include a mechanism for re-evaluation or iteration—you have to build that process yourself.

Lacks financial modeling. The matrix tells you what to consider but not how much it will cost, how long it will take, or what return to expect. It needs to be paired with financial analysis, market research, and resource planning to be actionable.

Bottom line: The Ansoff Matrix is best used as a starting point—a way to organize your thinking and spark strategic conversations. It should be paired with more detailed tools (PEST analysis, Porter's Five Forces, financial modeling) to move from strategy to execution.

How to Apply the Ansoff Matrix Step by Step

Using the Ansoff Growth Matrix can enhance your strategic planning process. Here's a practical, step-by-step guide to applying it in your business.

Step 1. Assess your current position

Before picking a growth direction, you need a clear picture of where you stand. Gather data on:

• Key metrics: Revenue growth rate, churn, CAC, LTV, NPS, and activation rates.
• Team capacity: Do you have bandwidth for a new initiative, or is the team already stretched?
• Financial runway: How much can you invest without risking core operations?
• Market position: Are you a leader, challenger, or newcomer in your category?

Be honest in this assessment. Overestimating your position leads to choosing strategies your organization can't execute.

Step 2. Map opportunities to each quadrant

Now brainstorm specific opportunities for each of the four strategies:

• Market penetration: What can you do to win more customers in your current market? (e.g., improve onboarding, launch a referral program, lower pricing for annual plans)
• Market development: Where else could your current product succeed? (e.g., new geographies, adjacent verticals, different company sizes)
• Product development: What new features or products would your existing customers pay for? (e.g., analytics module, integrations marketplace, AI-powered workflows)
• Diversification: Are there entirely new markets and products that make strategic sense? (e.g., launching a complementary product line, acquiring a company in a different space)

Write down at least 2–3 ideas per quadrant. Don't filter yet—this is the brainstorming phase.

Step 3. Evaluate risk and resources

For each opportunity, assess:

• Risk level: How uncertain is the outcome? (Market penetration is typically lowest risk; diversification is highest.)
• Resource requirements: How much time, money, and people does this need?
• Time to impact: When will you see results—weeks, months, or years?
• Strategic fit: Does this align with your company's vision, strengths, and values?

A simple scoring table works well here. Rate each opportunity on a 1–5 scale for risk, resource requirements, expected impact, and strategic alignment. This helps you compare options objectively rather than going with gut feeling.

Step 4. Pick 1–2 strategies to focus on

Resist the temptation to pursue all four quadrants at once. Most companies—especially those with teams under 200 people—should focus on one primary growth strategy and perhaps one secondary one.

Common combinations:

• Market penetration + product development. Grow your share in existing markets while building new features. This is the most common strategy for SaaS companies in growth stage.
• Market penetration + market development. Deepen your position at home while expanding geographically. Works well for products with strong product-market fit and clear international demand.
• Product development + diversification. Build new products for new markets. This is high-risk and typically reserved for well-funded companies with strong execution teams.

Step 5. Build an execution roadmap

Turn your chosen strategy into a concrete plan:

• Set measurable goals. Not "grow revenue" but "increase MRR by 20% in 6 months through improved onboarding and upsell of the integrations tier."
• Define key milestones. Break the strategy into 30/60/90-day checkpoints.
• Assign ownership. Every initiative needs a directly responsible individual (DRI), not a committee.
• Allocate budget. Tie specific dollars to specific actions. A strategy without a budget is a wish.

Step 6. Track, learn, and adjust

No strategy survives first contact with the market unchanged. Build a review cycle:

• Weekly: Check leading indicators (traffic, signups, pipeline, activation).
• Monthly: Review KPIs and compare against plan. Are you on track?
• Quarterly: Step back and reassess. Has the market changed? Should you shift quadrants?

The Ansoff Matrix isn't a one-time exercise. Revisit it every quarter or whenever a significant market shift occurs (new competitor, regulatory change, economic downturn). The companies that grow consistently aren't the ones with the best initial strategy—they're the ones that adapt fastest.

Summing up

The Ansoff Growth Matrix is a helpful framework for businesses that seek strategic direction and sustainable growth. By carefully analyzing your market position and aligning your strategy with clear objectives, you can unlock new opportunities and steer your business toward long-term success.

Albato Embedded is your trusted partner in driving business expansion. As a no-code embedded Integration Platform as a Service (iPaaS), it enables SaaS companies to strengthen their foothold in existing markets while seamlessly scaling into new ones. By simplifying integrations, Albato Embedded allows businesses to enhance their product offerings without the overhead of building and maintaining complex connections in-house.

Let's connect—our team is ready to help you streamline your integration strategy and unlock new growth opportunities.

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