The Marketing Book 5th Edition

Market

penetration

strategy

Existing

customer-led

strategy

Existing

product-led

strategy

Existing New

Diversification?

Existing

New

CUSTOMERS

PRODUCTS

518 The Marketing Book

the resulting tailored performance measures
should also change. Unfortunately, many com-
panies are struggling to control their marketing
activities because they are still using control
systems designed for previous competitive
strategies.
One way of illustrating this problem uses a
development of the Ansoff matrix to highlight
the different strategic thrusts which a business
can have. The Ansoff matrix has been used for
many years as a marketing planning tool, as it
indicates the way in which a business can try to
fill the gap between the simple extrapolation of
its current level of performance and the per-
formance required to achieve its long-term
objectives. The beauty of the matrix is that it
describes these strategic options in very clear
terms, i.e. increase the share of existing markets
with existing products, sell new products to
existing customers, sell existing products to
new customers, or sell new products to new
customers.
The Ansoff matrix illustrated in Figure
20.5 has only been modified in terms of
descriptions applied to the boxes for selling
new products to existing customers and sell-
ing existing products to new customers. Before
considering these, the other two possibilities
will be briefly examined from a financial
control perspective.

The implications of growing the business

by selling more existing products to existing

customers has been researched extensively over

many years, with some very unsurprising

results. Strategies to increase market share have

been shown to create shareholder value most

clearly when the market is growing strongly.

This is because, if the market is static or

declining, any increase in volume by the com-

pany has to be generated at the direct expense of

competitors. They are likely to respond aggres-

sively, possibly via a price war, which could

reduce the total profitability of the industry and

all the players in it. Thus, the strategy may be

successful in gaining market share but it will not

necessarily generate super profits. If the total

industry is growing strongly, there is less chance

of such aggressive competitive reaction, as their

own sales volumes and revenues may still be

increasing despite them losing market share.

As a result, companies are increasingly

using games theory-based strategic analyses in

order to predict both competitive responses to

their marketing initiatives and likely marketing

initiatives by competition. From the financial

perspective, shareholder value can be sep-

arated into two phases: creating value and

capturing value.

Creating value refers to marketing strate-

gies which seek to increase the total value

Figure 20.5 Potential strategic thrusts of businesses (based on the Ansoff matrix)