The Ansoff matrix is one of those strategic business models that marketers love - four simple boxes that can help guide your decision-making and give your business a clear direction.

I saw this model presented at an event last week but thought the implication of the presentation was more than a bit misleading.  The audience was made up of a mixed group of business owners, probably with an equally mixed experience and understandig of marketing strategy. 

The speaker presented the model as I'll explain it below, and asked his listeners to reflect on what they are doing in each of these boxes.  The implication was that they should be doing something in each of these boxes.  But to take that approach means that you're not using the model to guide decision making.  Rather, you're making decisions and then mapping them to the model retrospectively.

So how should you use the Ansoff model?

This model shows that you have two parameters on which you can make growth decisions.  You can make decisions about your product(s) and your market(s).  Each parameter typically presents different risks (something which this presenter didn't touch on, although I believe it's an important part of your decision.

Market penetration means that you choose to sell more of your existing products into your existing market.  It's a low risk option because you know your product and your market (I'd hope) and allows you to spot opportunities in circumstances that are familiar.  Marketing investment is usually relatively low.  It's not always thought of a sexy option - no innovation, few business thrills.  But in an economic climate where competitors are falling by the wayside, someone has to pick up that market share, so why not you?

Product development means that you develop new products for your existing market.  You should know the market well and be able to develop products to meets its demands.  There will be some risk along with innovation and probably costs involved in developing products or services but understanding the market should mean that you have an advantage in bringing in new ideas.

Market development, on the other hand, means selling existing products into new markets.  Agsin there is some risk and cost involved.  The trick here is to identify markets that have an unment (or undermet) need for your product and that have parallels with your existing markets that will help you get to grips with them quickly.

Diversification means taking new products to new markets which is much higher risk.  Risk and cost can be mitigated if product and market are related to your existing.  A brand "travels well" may help but not everyone is Virgin.

Tackling all of these strategic options at one time could well be very resource intensive and might present more risk at one time than you really fancy.  That's not to say that you should restrict yourself to one option either.  It could make good sense to, say, increase your share of your existing market whilst moving into new.

The point, really, is to use this model as a tool to help make sure that your growth decisions have some direction and structure to them; that the risk you are taking is one that you are comfortable with; and that any decision you make are congruent with each other.