The Massage Therapy Center maintains a database of over 700 clients and sends each one a special discount offer in the month of their birthday.
Managers hope that as existing customers use the discount, they will see an overall growth in sales. According to Igor Ansoff’s Product-Market Matrix, this is an example of the strategy.
a. diversification
b. product differentiation
c. market penetration
The correct answer and explanation is:
The correct answer is c. market penetration.
Market penetration refers to a strategy where a company focuses on increasing sales of existing products or services to its current market or customer base. In this case, the Massage Therapy Center is offering a special discount to its existing clients to encourage them to use the services more frequently, aiming for an increase in sales from a familiar market segment.
This is a typical example of market penetration because the business is not introducing new products or targeting new markets, but instead encouraging current clients to take advantage of an existing product (massage therapy services) by offering a discount. The goal is to boost sales within the existing customer base rather than branching out into new areas, which is characteristic of market penetration strategies.
Other strategies in Igor Ansoff’s Product-Market Matrix include:
- Diversification: This involves a company entering new markets with new products. For instance, if the Massage Therapy Center decided to start offering yoga classes to new clients, that would be diversification.
- Product differentiation: This strategy involves offering new or improved products to the same market. If the center started offering a new type of massage or other unique services to their existing clients, that would be a product differentiation strategy.
In the case of the Massage Therapy Center, they are focusing on retaining and encouraging the use of their existing services by current customers, which fits under market penetration. By increasing the frequency with which existing customers use their services, they aim to boost overall sales without venturing into new products or markets.