Market Development Strategy

Market development is one of the four alternative growth strategies in the Ansoff Matrix. A market development strategy involves selling your existing products into new markets. There are a variety of ways that this strategy can be achieved.

ansoff matrix market development strategy

New geographical markets
This could involve expanding outside of your region or selling to a new country or a new continent. The element of risk in adopting this strategy will depend on whether or not you can use your established sales channels in the new market.

New product dimensions or packaging
Your organization may simply want to repackage your product so that it can open up a whole new market. For example, a company that sold industrial cleaning products in 20-liter containers could break into the domestic market by repackaging in smaller quantities and developing a suitable brand image.

If you are responsible for packaging or production of the product you will be required to look at the new costs involved with these changes and new markets requirements and alter the marketing messages so that they are appropriate to that country's culture.

New distribution channels
Many companies have transformed themselves from high street retailers into Internet retailers. As a manager you could be expected to outline the internal and financial implications of such a change. Senior management would be looking for you to provide the details of how to make this approach a success.

This could include the training needs of employees so that they have the skills to fulfill Internet orders, whether they are taking incoming calls or processing online orders. You would need to demonstrate an understanding of the operational changes your organization would face, such as a centralized warehouse rather than local depots.

One example of this type of market development is the sale of high-end sports equipment, which is now almost exclusively sold online rather than through sports equipment retailers. Another example is the sale of DVDs in retail outlets like supermarkets and gas stations rather than specialist entertainment stores selling predominantly music and video products.

Different pricing policies to create a new market segment
The important aspect of this approach is whether or not current users can easily alter their purchases to take advantage of the new market pricing. A good example of how to protect your existing market whilst developing a new one is Adobe Photoshop. It protected its price difference of hundreds of dollars of its original professional product by offering a reduced 'home' version that had a restricted set of functions.

Market development strategy Ansoff matrix

Whilst there are similarities between the first two strategies, market development involves a greater degree of uncertainty, risk, and financial commitment.

One of the biggest dangers of this strategy is the risk of alienating your current customers. For example, the tools made by US company Snap-on are widely regarded as the best in the world and are used by almost all professional automotive racing teams.

Snap-on tools are only available through a tightly controlled network of franchisees and the company has resisted the temptation to develop any markets outside of professional mechanics. This strategy has allowed Snap-on to maintain its position as the number one supplier in this highly competitive market.

One way around this problem is to sell a cheaper product under a different sub-brand. This is something that has been done successfully by the US musical instrument company Fender, which created the 'Squier' sub-brand in order to market budget instruments without alienating its core market of musicians who want to own a recognizably high-end instrument.

Key Points

  • A market development strategy involves selling your existing products into new markets.
  • There are four strategies that can achieve this: new geographical markets; new product dimensions or packaging; new distribution channels; or the creation of a new market segment by means of different pricing.
  • One of the biggest dangers of this strategy is the risk of alienating your current customers.
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You may also be interested in: Introduction to the Ansoff Matrix, Market Penetration Strategy, Market Development Strategy, Product Development Strategy and Diversification Strategy.

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