BSMS 62 - Get more market penetration with Ansoff’s Matrix

Brian Graf: Hi there and welcome to Episode 62 of B2B SaaS Marketing Snacks. I'm Brian Graf, I'm the CEO of Kalungi. And I'm here again with Kalungi’s co-founder, Stijn Hendrikse, who's a serial SaaS marketing executive and ex Microsoft product marketing leader. Today, we're going to kick off a series on strategic growth.

Namely, we're going to use a framework called Ansoff's Matrix to help you identify the main levers you can pull to help grow your company. We'll talk you through how to conduct the exercise and how to get your team in line behind it. We'll also talk through the bottom left hand corner Tan quadrant of the matrix called market penetration.

We'll discuss some factors you should consider and some tactics you can implement to effectively grow your company through this strategy. Let's get into it.

Okay. And we are back. Thank you again, Stijn, for joining me today. We have a topic that I feel like I was excited to talk about. I feel like I try to read a lot of business books and a lot of blogs and social media that I can about business growth. I'm sure some of you read more than I do, but. One of the things that I've noticed is that there's many good ideas on how to grow a company.

Everyone, it's always full of ideas, different strategies and different tactics that you can use. But one of the things that I think is missing and rightfully so is how do you as a company actually decide to use certain ideas and strategies versus and not use others. Like how do you decide actually what strategies and tactics are the best things to set your company up for success?

And we use a tool here, a framework here, that has really helped us and other companies prioritize and say no to the right things so that they can say yes to the really important ones. And so we wanted to share that here. We've written about it a little bit in the past, but I wanted to bring Stijn in again, because he has had the most experience with this out of anybody at Kalungi.

And so I thought he'd be a fantastic person to speak to. So what I'm talking about is what's called the Ansoff matrix. And it's a very simple two by two matrix that helps companies, particularly executive teams, decide what strategies they're going to use to grow. And I was thinking we could do a four part podcast series on this framework and really try and dive into each quadrant.

When we think you should use it, what the pros are, what the cons are, you know and what, what I guess requirements there are for each quadrant to really set you up for success. And again, to help you craft the best strategy possible and get your team as aligned as possible behind that strategy.

So with that in mind Stijn, would you mind just telling us a bit about The Ansoff Matrix, what you've used it for in the past? 

Stijn Hendrikse: Yeah, thank you. Thank you, Brian. There are so many frameworks out there that allow you to brainstorm about how you can grow, right, and to prioritize. There's two by two matrices about how there's the opportunity size compared to the cost of doing it or how complex it would be to do so.

And those are all very useful. There's many others. Why did we land on the Ansoff matrix, which is a relatively dated model? I think when you go to Wikipedia, you find things that are probably 20, 30, if not 40 years old, that are either very similar or they're actually called Ansoff matrices. The reason I really sort of standardized on it to have growth conversations with an early stage SaaS company or an early stage technology company is the two kind of strategic conversations that makes a lot easier, in addition to just being a good tool to inventory all the ideas and creative process and then use that to prioritize, etc.

So what are those two things for me? make it such a powerful tool to kind of help with some more strategic challenges that you usually have when you talk about growth strategies. The first one is that it's very, very natural to, when you talk about growth, to think about growing a new part of the market, to be very quickly distracted by whatever the next shiny object is.

It could be an expansion of your market segment you're in. To go after clients that you haven't serviced. Today there are not that many, but you should be able to service so easily. It should be easy to go to a larger market of clients or to a vertical that looks a little bit like what you're doing today, but it's just a little bit different.

So all those things are extremely easy to get distracted by. And what the onus of the matrix does, because it's so much, it clearly delineates between going after the type of client that you already know how to service. The part of the market where you have reached product market fit versus expanding to another part of the market.

Either expanding your ICP to new verticals or to other types of clients or to new use cases. Then it makes at least a very conscious decision. And it allows you to challenge what we make our existing ICP is enough. There's a reason product market fit is so powerful. It's really because that part of the market where you have proven to have a really good connection between what you have to offer and what these clients need, because the economics will get so much better if you focus on that part of the market first.

So, making that really clear is something that the answer of my matrix, the kind of the framework makes easy. To say, hey, are we ready to expand beyond our existing ICP? Have we done everything we can to make sure we got everything out of the existing market where we've already proven to be successful?

That's one. And in the answer matrix, we'll talk a little bit about the quadrants in a sec, Brian, how that works. But it kind of allows you to have that conversation relatively discreetly. Like we're not going to go to the upper left quadrant if we haven't finished everything we can do on the lower left quadrant.

This left corner is basically about milking the existing ICP as far as you can. And then the other, the second part of that strategic conversation that is really useful and the answer the matrix makes very easy, is to also not blame or create dependencies on the product on the product deficiencies or create any product dependencies for your growth.

Oh, we need to have these five capabilities or features or parts of the product. And then we can go after a certain growth lever and you end up kind of waiting for R&D to R&D Nirvana. You kind of become less, you have less agency over your growth yourself as the marketing leader or the sales leader.

Because you now introduce all these product dependencies. And that's the other side of the matrix. It's kind of going from the left to the right, where you go from having a strategy that's centered around growing in the part of the market where you've proven market success with the product that you have today, to now thinking about, oh, I have all these new product capabilities.

If I only had those, then I could go after all these other opportunities that I'm not able to close today. And again, Making sure you don't go down that path too fast. Not before you've actually done everything you can. With the current product, sell what you have before you start kind of envisioning what you need to sell tomorrow that you don't necessarily have today.

It's very powerful. That's why I like the Matrix from a strategic perspective, Brian. And then the other thing that also makes it really easy is to size the opportunities. That you kind of have in multiple parts of the matrix. The four quadrants, and then use that to calculate if this is going to help you.

Do you have enough coverage, if you will, to support your total growth ambitions? 

Brian Graf: I think just a few things that I like as well to add on before we dive into the actual model. Depending on how fast you want to move and how well you have set up communication within your company, I think it's easy for the CEO to set a goal, And then to work with each department individually to try and accomplish it, which can, it can be dangerous just because there are a lot of conversations that get missed and a lot of assumptions that are made, right, that can hurt your ability to achieve a goal.

And so just looking at this framework forces you to this framework forces you to, Get all of the right people in the room who would be responsible for the growth target. And to make sure that everyone is aligned on what needs to happen to hit it. And so that, Stijn, you were talking about shiny objects earlier and how it's always, it's always good to go.

Everyone always wants to go on to the next big thing. That, I think, a lot of times in companies, growth can boil down to acquisition. And how can we acquire more customers? But also what's equally, if not more important, right, is how can we retain the customers that we have? And how can we monetize those customers?

And so again, just getting everyone in the, in the same room to have that conversation on what is actually the highest priority for the company is really important. And then I also really like it in that it takes a big goal and it forces people to put pen to paper in terms of what actually needs to happen to get this goal, to accomplish this goal.

and what trade offs need to be made. There are limited resources in all companies and this is a great occasion to have those conversations of if I, if I am going to take you know, this big risk or take on this big initiative, then I'm going to need to give up X, Y, and Z in order to do it. And getting everyone on the same page.

So, let's talk a little bit about the framework itself. We've written quite a few blogs on this across Kalungi.com and t2d3.pro. So we'll link those blogs in the show notes for you to see. But just to explain it to you as you're listening, right, it's a two by two matrix. And on the Y axis, you have basically your customers.

And so on the, on the lower left, you have current customers. And on the upper left, you have new customers. And then on the X axis. offerings, basically what you can, what service you have or what your product is. And on the lower left, you have current offerings and on your lower right, you have new offerings.

And that basically creates four quadrants that you can think about in terms of growth. There's the lower left, which is basically your current, current offerings with your current customers. Right. That's kind of where you are today. And we like to call it market penetration. How do you penetrate the market that you're in today with the offering that you have?

Then in the upper left, you have new customers with your current offerings. That's kind of what we like to call a market expansion. Right. You're, you're taking new customers You're going after a new geography or you're going after a new ICP, but with the same product. Then in your bottom right, you have your current customers, but with new offerings.

So how are we developing our product or our services to better service our current customers? We like to call that research and development. And then the top right is new customers and new offerings, which is really just a pivot. We're going after a new target market with a new product. It's a complete pivot from what we have done in the past, right, which is a big undertaking.

So I'll talk briefly about how to use the Ansoff Matrix, but also just, I guess, for this episode, we'll focus mostly on the market penetration quadrant. And then in future episodes, we'll go into the other three. A small aside before we get into that, how do you use the Ansoff Matrix? The first thing is that you need to get into a room with all of the executives and leaders in your team and all customer facing people who are strategic.

Think sales, customer success, marketing, product executives. Those are all the minds that you need to have in this room. And it needs to be a pretty substantial amount of time. I'd probably say at least a few hours. What we like to do is to set a numerical growth goal at the center of the matrix.

And that could be a number of customers, a dollar figure. A percentage growth, maybe beta users but it has to be a real number. And, and a tangible result within a certain timeframe so that everyone is, there's no question about what needs to happen by when to be successful. And then you basically give everyone sticky notes that can be virtual or real.

And you have them basically try and fill out each quadrant for how they think they are going to accomplish that goal. And on each sticky note, you want to include the initiative, the time frame, the growth impact, so how much you think it will impact the goal, how much or how difficult it will be to do, whether that's in dollars or hours or difficulty, and then who is actually going to own that card or that initiative. From there, that basically populates your matrix. And then you can have some really good discussions around prioritization, around solidifying initiatives, and getting buy in. Let's pause there, I guess, and start to talk through some more details.

But first, Stijn, I have another question for you. You mentioned kind of why you like Ansoff Matrix, but what have you used it for with executive teams? You know, you often come in as a fractional CMO. How do you use it to get everyone on the same page and establish the right strategy? 

Stijn Hendrikse: When you're a little more mature in your growth journey, you typically have a thesis as an executive team that your growth is going to come from either expanding to new markets, adjacencies, new industries, new types of clients, or you have an opportunity to expand the solution offering that you have with more capability that will allow you to get your output to go up. The amount of revenue. You basically get per customer. And that's a very easy bridge to an answer of matrix exercise.

We say, okay, if you assume that if you build these three new features or you add this new module or you, you make the product better in whatever shape, way or form, let's put some numbers on what you think the additional Monetary value of that is right. How much do you think you can then upsell your existing customer base to?

What's the increase in price that they're going to pay? What are the modules that they're going to add to their current commitment that will make the average revenue you get per customer higher? So making that very explicit, and you can do exactly the same if the, if the growth thesis is, hey, if we go from just servicing higher education, we go to maybe some kind of healthcare sub segment that's also education like, but it's a little different, and it's a new revenue stream for us, you can tie that to, okay, let's talk about what that is.

The amount of potential prospects is in that part of the market and how big their average ticket size would be and how fast you would think you can convert to find those prospects and convert with the clients and make it all those super, super concrete. So either in a market expansion growth you know, vision of the leadership team or a market sort of a customer expansion, getting customers to pay you more, you can make those assumptions.

Discover something really specific. 

Brian Graf: Perfect. So let's dive into the current customers and current offerings quadrant, that bottom left quadrant, what we like to call market penetration. This is, again, it's using your current service or product with the ideal customer profile of the current, current market that you have, and basically trying to get maximum penetration out of that.

Making the most of what you have. What we've seen is that in our, with our clients, this is typically the most common quadrant and commonly discussed quadrant because it is kind of here and now. It's the strategies and tactics that we need to hit our short to medium term goals usually.

But, it's usually shorter term. It's yeah, it's, it's six months to a year, but just, I guess a warning. It may not be the most common quadrant for all companies. This would be more common for established companies. Maybe that is the past minimum viable product. And are in the product market fit and and scaling.

If you're a new company that's looking to launch, this will not be your quadrant. You'll be looking more into this. The market expansion quadrant. Just so that we're clear. But, some of the requirements are to just get going and make sure that you can be successful with this quadrant. Obviously you need that corporate top goal that we've already discussed, and you need the team to be aligned behind that goal.

It's one thing to set a goal, and it's a whole other thing to make sure that the team actually is bought in on achieving it. And then you need to really have a go to market strategy. You need an ICP, ideal customer profile, you need personas, you need messaging and positioning, you need a marketing foundation, and you need a go to market motion to really be able to discuss and execute this plan.

And if you don't, those should be your first, the first things that you put into this quadrant. And of course you need traction within a market to be able to use this, this bottom left quadrant. What I guess when you've worked through this quadrant particularly, but, but also the Ansoff Matrix, have there been scenarios, Stijn, where you have worked with a team and it has worked really well?

With this exercise or or maybe not as well. have there been team dynamics that have made it really successful versus not or an increased focus or lack of focus. What have you seen? I think this is a very Rich quadrant that usually is not understood as well. But they've never really gone into hey, when's the last time we raised the price?

What is the Average kind of upsell, cross sell opportunity. How have we seen customers expand. How many users do we have per customer? And have we ever really deeply thought about how to expand user count? Have we thought about reducing the amount of discounts we give and the Earlier, when we do the initial sale, right, the whole land expansion motion in SaaS is, of course, very tricky because landing and expanding is, of course, great.

It's phenomenal. It's a great way to grow a SaaS company until it becomes, oh, we don't really land like what we could land because we can expand later. We either give away too much discount or we sell. A very small deal up front because we just don't necessarily want to go through the friction of selling.

All those things live in that lower left quadrant. And how do you get more out of the existing market that you're in with the solutions that you're selling today? So, I think you can just have these very rich conversations about very specific opportunities because you're, you're preventing yourself from getting distracted from, Oh, we can go into a new industry or we can go build this new capability first before we start selling it.

I think that, and it goes through to the core of a successful B2B SaaS code journey, starting with monetizing the existing clients that you have. Make sure you retain them before you start thinking about, Oh, how do I add new logos and add new customers to the pipeline? Which you also have to do, but it's that sequence and forcing yourself to stay within that lower left corner and thinking for a little bit.

Have we done all of that? We've done everything we can to optimize our program, we've done everything we can to get the most leads out of the current channels that we already have in the current part of the market that we're already focused on. I think it's very powerful. To your point, right, we've seen a lot of companies, I think, some of the, when I've had trouble with executive teams around this quadrant in particular, has been with executive teams who, who just don't want to Focus right on their current market and current product because they just haven't had success.

Brian Graf: There's always the question of if you're not having success. Is it the right strategy or is it because you have the wrong strategy or is it because you have the wrong tactics? And execution or the wrong team. There's a lot of variables in this And so it can happen often where we'll come in and people will be excited about bringing in a new team and we want to grow fast.

So if we're going to grow fast, that means that we have to do something drastic, like expand markets, like reinvent the product. Which may not be the case. It may be the case, but it may not. And so I think what, what is required, just like we have had many difficult conversations with founders around this, really narrowing down their ICP.

It's really narrowed down their go to market focus using this quadrant. And like, Stijn, like you said, right, it's really nice to be able to focus this quadrant around what we like those three areas of growth, monetization, retention, and acquisition. And to, because they're so interdependent.

Understanding what's the biggest priority and how each team can help. So basically we're going to take away discounts. From sales, then sales usually will need more supporting assets for marketing to be able to do that. Right. And, marketing will have probably less promotions to go to market with.

Right. And so there's, there's impact down the line. For each of these decisions. And it's really important to have the conversations. With all team members present of what those are and what the trade offs are, like I said above. I think it maybe it's just useful for us to go through some of the tactics that can come up in these, in this quadrant.

So that you as the listener can decide if and when they're right for you. Like Stijn said, right, on the monetization side, you can have pricing and packaging discussions. You can think about, yeah, when's the last time that we upsold. When's the last time that we increased our price?

What is our strategy around our pool? Do we have a “land and expand” motion in place? Is it working well? Does it need to be improved? How well is our customer success team doing at improving and upselling clients? You know, how many gated features do we have on the product side that are helping customers to self select up.

Things like that. And then on the retention side. Do we have the right nurture campaigns in play? Do we have, are we constantly engaging and rewarding customers for being engaged with our product? Are we going after and picking up the ones that aren't engaged? And understanding what's wrong and bringing them back to the product.

Does customer success have all the resources that they need? And then, of course, acquisition. Our, our forte. Have we, have we looked over our messaging and positioning? Is it really resonating with the market? Do we have all the right demand generation tactics in play? If not, right, which ones do we want to prioritize?

How much is that going to cost? And how much is that going to take away from our current initiatives? Do we have key content? Do we have a website? Is that in the right place? Is our brand in the right place? Do we have the right sales support assets in place? And then do we have the right Funnel conversions points down the funnel all the way from top of funnel and awareness down to the bottom of the funnel and the sale.

And then of course, finally on the sales side. Do we have the right team in place? Is our close rate right? Do we have the right process and handoffs in place? Do we have the right objection handling? Do we have a playbook? Do we have follow up campaigns and we have, have we gone after close losses?

To make sure that we're picking them up. Those are just to rattle off a list. Those are some areas that you can think about. When you're using this quadrant for your team. And it's really important, right, to have the discussion of, in terms of, prioritizing your focus.

You'll want to end up with probably the top three to five of these things that you and the team can really focus on over the next quarter or two or three. You don't want to get strung out between 15 where you just end up making no progress because your focus is too broad. Anything that I'm missing in terms of Tactics or strategies for this quadrant?

Stijn Hendrikse: I think it also, again, is forcing you to talk about the hard problems in scaling your existing go to market, whether it's optimizing all your channels vis a vis each other. Do you have good benchmarks? Is every paid channel really under control? Do you have a good, this is what a cost per lead should be and how do all the channels perform against that?

Is your organic marketing really in good shape? Are things like your conversion rate optimization done? At a relatively sophisticated level, I think doing all this is a really good forcing function, and then the foundation will make it so much easier whenever you have a new product capability, or you go into a new market to do all those things really well.

Brian Graf: And one thing that I like about this exercise, particularly in the market penetration quadrant, is that it almost forces healthy conflict amongst the team. Everyone will have good ideas. And it is almost guaranteed that you won't be able to do all of them. So you will have to prioritize, as a company, which ones are the most beneficial for the company.

Sometimes that means that marketing's initiatives will be deprioritized. Sometimes that means that product's initiatives will be de-prioritized. And so it's really, it's a healthy exercise to have, to really get clear on what the priorities are, what resources do we have at our disposal, and how can we as a group get to that goal in the most effective way, not how can me, how can I and my department, right, look good and have good ideas and get budget.

It also, Stijn, to your point, right, Opens up a really nice conversation around stress testing what's currently in play. It forces you to ask questions on we really thought that that paid ads we're gonna We're gonna pan out over the last six months But we we've only seen 10 mqls come from them and we've we've spent whatever a hundred thousand dollars on it. Maybe this isn't the right channel for us.

And even though it's you know, we have some great creatives and we're excited about it. It's just not panning out. So how can we utilize those resources in the best way?

Okay, so coming back to the steps of the process,you've set up the board. You know what everything is – you've given everyone their sticky notes. They put them all on the board and you've had some really good conversations. I would then force the team to vote on their top five give or take depending on how many stickies are on the board. Initiatives right you only get five votes. And you can vote according to how important you think those things are.

And then basically call a break. Let the team go and sit with the list that you've, you've built in the quadrant along with those votes. And start to think about prioritizing those as a leadership team. Look at, You can use whatever prioritization methodology or framework you want.

The one that comes to mind for me is the Rice methodology. And you can look at each thing in terms of the reach that it will have, the impact that it will have. The confidence that you have in your ability to execute it and the effort that it will take some frameworks like that will allow you to prioritize and really just force yourself to stack rank the list.

From there, you'll be able to have a very simple list of initiatives. The impact that they'll actually have on that target that you set as a company. Who owns it? How much effort do you think it'll take? The cost. And it will be a very clear starting point for a framework like Objectives and Key Results.

Right, that you can use to really harness the team's efforts and get them going. And then, of course, right, once you have that, you want to present that to the team, get their buy-in, and start really executing. Get the right timelines in play, get the right KPIs and dependencies figured out.

Let's start following up and really just continue your focus on it throughout the next quarter, the next year, whatever that timeframe is. This allows the whole team. To be in line behind the same company goal, behind the same initiatives that all support the company goal. And all working in lockstep together.

Not to say that it will completely eliminate arguing between teams, but it's a very big step in the right direction, I think, for a lot of teams. And you commit to these numbers together. When you think about price increase being a great way to grow your revenue, then the sales team will be in the same room where they have to have these conversations.

Of course, the marketing team will have to create the content. And of course, the leadership team as a whole has to agree on the strategy, the support and the customers existing. We have to be able to take the customer call and say, Hey, I didn't use the software for the last year. Anyway, yeah, it's great.

It's a great tool, Brian. It's so simple and it allows you to not get distracted by too many complex templates and spreadsheets and just have the conversation as a leadership group. 

Brian Graf: Yeah, absolutely. So please try it out. Have a conversation with your, with your leadership team, with your executive team, and let us know how you think it went.

If you have questions as well, we're happy to take them. But okay, that was the first out of four quadrants of the Ansoff matrix, and we're excited to do market expansion next week. Thanks so much, Stijn. 

Stijn Hendrikse: Thank you!

Brian Graf: Thank you to Adriano Valerio for producing this episode, and the Kalungi team for helping us make this whole thing work. And of course, you, for choosing to spend your time with us. As a reminder, all the links we mentioned in this episode can be found in the show notes, and if you want to submit or vote on a question you'd like us to answer, you can do that at Kalungi.com/podcast. 

Every time we record, we take one of the top three topics and jam on it. 

Thanks again.

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