BSMS 62 - Get more market penetration with Ansoff’s Matrix
The secrets to greater market penetration for your software company can be found in the lower left quadrant of the famous Ansoff Matrix.
Selling an existing current product or service into a new group of software customers can be a big challenge. Today we dive into strategies for marketing expansion for your SaaS company using the wisdom found in the upper left quadrant of the famous Ansoff Matrix.
In Episode 63 of the B2B SaaS Marketing Snacks Podcast, we talk through the indicators you should look for when considering a marketing expansion strategy and what new initiatives you can take to effectively sell into a new group of customers without changing your product or service.
The Ansoff Matrix, named after mathematician Igor Ansoff, is almost 50 years old. However, as a SaaS founder, you will find its wisdom will ring exactly true for your software company today.
Maybe you just got funded and have more capital to spend, but expectations for growth pace are now much higher too. Other signs that your current market isn’t providing what you need could be:
Of the four possible ways to grow a company (according to Ansoff’s Matrix), market expansion is more challenging than selling into a well-known customer type (“market penetration”). You won’t find it as easy to leverage your company's established strengths, brand awareness and market knowledge as key advantages.
B2B SaaS Marketing Snacks is one of the most respected voices in the SaaS industry. It is hosted by two leading marketing and revenue growth experts for software:
B2B SaaS companies move through predictable stages of marketing focus, cost and size (as described in the popular T2D3 book). With people cost being a majority of the cost involved, every hire needs to be well worth the investment!
The best founders, CFOs and COOs in B2B SaaS work at getting the best balance of marketing leadership, strategy and execution to produce the customer and revenue growth they require. Staying flexible and nimble is a key asset in a hard-charging B2B world.
Resources shared in this episode:
Brian Graf: Hi there, and welcome to episode 63 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 continue our strategic growth series and dive into the top left hand quadrant of Insoft's matrix, market expansion.
We'll talk through the ins and outs of marketing expansion, what indicators you should look for when considering this strategy, and some of the initiatives you can take to effectively sell into a new group of customers with your current product or service. Let's get into it. Okay. So welcome back to part two of our strategic growth discussion, where we basically take the Ansos matrix and pick it apart into quadrants and talk through the pros and cons of each and why we think you should, or why you should consider using them for your business or not.
In the last part, we talked through Ansoff’s Matrix as a whole. Its benefits, how to use it, how to implement it with your team. And we talked through the market penetration quadrant, which is really usually the most near term quadrant and the one that you can kind of capitalize on what you've already built.
With your current product and your current market. This session, we're going to go into market expansion, which is where you basically take the product that you have and you enter a new market with it. Basically when deciding if and when you want to go into this quadrant, it's good to keep a few things in mind.
I guess the first question that you need to ask yourself is, is the current market that you're in right now giving you what you need from a business standpoint. Because if it is, then that raises the question of even if you should explore this expansion product, but, but if it's not right, think about your current market and some of the results that you would be looking for.
Are you experiencing something like a low retention from your market, a low or slow sales cycle, low average contract values, or high customer acquisition costs, or you're just missing your revenue targets, those can be signs that maybe the current market isn't providing what you need from a business standpoint, and then it can You know, a good indicator to start looking into something like a market expansion, or it's just, you know, your current market is working fine, but, but your growth goals are increasing.
Maybe you got funded, and now you have more capital to spend, but you also have increased expectations for your growth. I guess let's start there to set the stage. And from your perspective, Stijn, you know, maybe we can talk through a little bit of what you think, you know, market expansion is why you think it's important for businesses, and, When off the top of your head, you know, they should start considering this strategic move.
Stijn Hendrikse: We encountered a company that wants to grow. The first step is usually to grow based on the beach that they have already achieved. So if you, if you have that, that's when we Go into the ounce of matrix lower left quadrant, which is basically selling more to the customers you already know with the solutions that you already have.
This upper left quadrant is very common both when you start on the product market fit journey and also when you want to expand beyond the segment that you're currently successful in because you want to basically increase the amount of market that you can service. But the mechanics are not that different.
You're, you're, you're now, again, you're basically going to try to reach product market fit in a new part of the market. So the first thing I want to refer to, and we'll put it in the notes here, is the article that we have with multiple versions of it, kind of the 10 steps to get to product market fit.
So that those apply again. So when do you do this? You do this when you've optimized, we always want to start with optimizing the current ideal customer profile. The current market segment where you have your strongest beach hat. An optimization kind of ends when you, your funnel is close to perfect.
It's moving fast. The funnel is the biggest size you can get it to. It has good conversion rates. The ACV, the average customer value is relatively high. So when you've achieved a lot of those optimal KPIs, Now it's time to say, Hey, are there other parts of my market or sorry of the market that I could service that I haven't been focused on yet that I want to expand to?
And it's honestly usually a combination of both expanding your ideal customer profile horizontally with a kind of larger geography filter, maybe customers that are a little bigger, but then also maybe in a more, more vertical way. If you think of other industries or other types of use cases or jobs to be done.
And all of those come basically down to picking one of two strategic changes to your go to market approach. One is to differentiate yourself in a new part of the market, and the other is to disrupt. And we use these two ways to kind of describe niching down, like grabbing a specific part of the market and getting really, really good at it.
And that's what you do on the upper left quadrant. And differentiation is when you do something better than others for a certain part of the market, and now you get so good at it that You may actually be able to dominate that part of the market. That's what nailing a niche really means. And the other variant is you, you disrupt an existing market because you do something at a lower rate of friction than the other players, which means customers will just find it easier, cheaper, more logical to go to your solution because it's just, it's just lower friction.
So that's disruption. The other one's differentiation. Both will lead you to then dominate maybe a new part of a new market or a new part of an existing market that you did not dominate before. That, that's kind of the, the, the summary. And then we can go into more detail.
Brian Graf: Yeah, we'll definitely go into more detail.
I think that's a great overview. I think one thing to just keep in mind as we go through everything is that, and you pointed it out, right, is that going into a market expansion motion is really just restarting a go to market. A go to market strategy. And one of the key themes that will help to capitalize on the existing momentum that you have as much as possible, if you are doing it as more of a reaction, say to poor sales in your current market, or you're, you're kind of hoping that it's a quick win.
I'm not sure that you'll find that with this particular strategic lever. So just keep that in mind as we go through everything, maybe let's just start with Stijn. You know, when have you seen this growth tactic work really well for clients? What, what was the situation and what do you think ? That you and or they did really well to make it to maximize its impact.
Stijn Hendrikse: Yeah, let's say you have, you have a couple hundred clients, right, and they're all relatively similar. And most of them, of course, like using your solution and that seems to fit, but then they might all have a similar job to be done. Similar use case, maybe they have similar industries that they service, that their customers are in.
But maybe then you find a sub segment that has even more specific needs, right, that asks you for a certain capability that you haven't provided yet. And then if you have to build something new that would, would land you in the lower right version of Ansoff Quantum, we'll do it in another podcast, but if they're just basically telling you to do something specifically for them that you already do, but you don't maybe using that language, you're not describing it like that, right, for an educational institution, then they might describe a feature you have in an, in a way that they can't.
The way that it's useful for them and then niching down in, for example, higher education could mean that you're starting to use that language. You're basically going to have a specific part of your digital real estate, your website, the way you express yourself on social, the type of content you build to be very focused on that part of the market, which means they'll, they'll start thinking of you as, you know, a provider that really cares about their needs.
And that's what niching down really is. To get extremely good at what a specific niche in that market wants. So that's where I see a lot of success. You have a couple hundred clients, maybe 10 or 15 of those that are very uniquely identifiable, either by the type of industry they're in, or the type of the way they use your product or the size that they are.
And you can now choose to get even better at servicing them and use language and create content and actually have salespeople and customer success people that only work with those types of clients so that you get really, really good at knowing them and they know that you care because of that.
You might even add job titles to people in your team. You might be called a higher education account manager or customer success team, higher education onboarding process. And, and all that might not mean you don't need to change your product at all, but it might just mean that your customers will really, really think of you as the type of provider that they exactly need.
And that's what you do when you go in that upper left quadrant. You're basically changing your go to market, you're tweaking it, you're adding language, you're adding content, without having to change your product.
Brian Graf: Yeah, that was what I was going to say. Keep in mind that in this description, the product has not changed at all.
And I think another really key point to what you're saying is that you're basically taking a look at your current customers and you're picking a sub segment that has worked really well, but that you just haven't focused on. You're not necessarily going out and trying to grab a brand new market from zero.
You're, you're capitalizing on initial momentum that you've just seen organically that has come in through the door, even though you were focused on a different segment of the market.
Stijn Hendrikse: One of my favorite examples is when you would. Let's say you sell retail clothing, and maybe you've become very good at selling children's clothing.
That's your, your market focus, that's your ICP, people who need clothes for their kids. And now you could say, Hey, I'm going to niche down even further, I'm going to only position myself as providing clothes for twins, for identical twins. And you don't need to sell different clothes, but you're making a commitment to that audience that you always have two pairs of the same size in your store. That you'll always have content that's about what you, the things you deal, have to deal with if you have a pair of twins. Maybe there's other things that your content can address that have nothing to do with the clones themselves, but how you buy them, how you make sure that the kids are secure, or solve insecurities in how they, You know, think about clothing, I don't know, I don't have twins myself, but that is kind of an example where the product doesn't change, but the positioning can change dramatically.
And now if someone finds you and they have twins and they see that your website and your positioning and your messaging is all about servicing people with twins, they'll probably shop with you first before they go to a general clothing store.
Brian Graf: Also to use the, to expand the analogy to maybe a geographic segment.
You could be that you've found strong traction in the U. S. and just happened to find that a few Canadian companies are trickling in your door. For the same product, for the same value propositions. But you've never really focused on the Canadian market. So you do some research and you see that there isn't a ton of competition.
You can, you can leverage your existing content, your existing product, almost your existing go to market strategy, but just refocus it on the Canadian market. And then you have a market expansion. So when has it not worked so well. Have you seen instances where somebody has, has decided to do a market expansion and And just the results didn't end up coming from it.
What have you seen in your past that has led to that?
Stijn Hendrikse: Yeah, you can't really fake it. I think that that's the first thing you have to actually commit. You have to say, Hey, I have certain people in my team. We're going to focus on this new market segment. They're getting to know those customers, how they speak, what they like, what they don't like, how they buy.
That might, they might be buying something different. They might have different expectations from a discovery call from a sales call. They might look for different types of content. Although again, you're probably not. Product doesn't change, but you have to commit to that. You have to create that content. You have to maybe tweak your onboarding sequences.
You have to maybe change the way you market the events that you go to the ads that you run. The copy in those ads, all those things you have to actually make real changes and then it can work, but you cannot just kind of spray and pray and do a couple of these things. Don't like to sustain them, only do it for a couple of weeks.
And then don't wait for you to actually learn from what works and what doesn't and adjust but maybe give up if it doesn't work right away. So you have to commit to it. And then of course you do need a starting point. I think this only works if let's say you have, let's say you have 800 clients. If you have eight or nine or 10 clients that are actually in that new niche that you want to nail, that you can start learning from.
Did you have it? Enough knowledge about like, what do they like? How do they speak? Et cetera. Did you have a starting point on how to position yourself for this new part of the market?
Brian Graf: It's really important to think about the gravity of what. You're undertaking a market expansion. It's not a trivial initiative.
It really, if you want it to be successful, it requires a lot of focus and a lot of time and capital, honestly, from you and your team. You know, you can think about it if you're going up against, if you're, if you are expanding into an already competitive market, you're going up against full companies that have fully fledged go to market strategies focused on that market.
So you. For lack of a better term, half assing it won't, won't deliver the results you need. Or if you are expanding into a new market, right, that is a whole beast in and of itself, right, and it requires a lot of consistent effort to get it off the ground and education, right, so it's not something that you can kind of put down.
Put in a deck, right, and have a meeting with the team and say, okay, go. And it just magically appears. It really takes a lot of work to get off the ground. So, and also
Stijn Hendrikse: don't do, don't do too many changes combined. If you enter a new market by saying there's a, there's a certain vertical industry that like you, you have oil and gas covered and now you maybe want to go to some form of discrete manufacturing because they need exactly the same expense management solution or software.
Distribute sales force or something like that, then change that. But don't immediately also go to do that in Germany, or maybe don't immediately go from small clients to large clients. So, change one or two attributes of your ICP at a time. Don't change too many because you kind of have to build out from your existing position of strength and then build new beach hats that you can then start growing.
Yeah.
Brian Graf: Some of the things that I've seen are just, it can be tempting to see even in the situation that you described. Where, where 10 customers. It can be really tempting to say, Hey, we've had really good success with these 10. We're going to jump all into this new segment. It can be tempting to do that without doing the proper diligence, to make sure that it's a good move.
10 is still a small sample size. And so it is really important to make sure you do some research and really think this through before jumping in. If you don't, say, You know, run some test campaigns or test your messaging or do some really in-depth competitive research. You can spool up all these resources and deploy all this capital only to find that the market is not quite what you thought it was.
And maybe there's a big competitor that's really well established that you didn't know about. And so it's really important to know what you're getting into when going into something like this and making this move.
Stijn Hendrikse: Yeah. One other way of maybe taking on too many changes at a time is to also change the go to market execution too much.
Right, if you've really succeeded with organic growth or with paid search or with a partnership strategy or with some form of social media marketing, then kind of try to stick to those channel guns, if you will. Don't suddenly think, oh, we're going into this new market. Let me go try out account based marketing if you've not done that before.
Right, if that wasn't the way you went, you had success inthe lower left quadrant. I would again, not change too many things.
Brian Graf: Yeah. Again, with this move and really a lot of go to market strategy moves. I wouldn't recommend this as kind of a defensive reaction to things not working out as well in your current motion.
You really want to maximize the impact that you can have based on the momentum that you've already built. Right? So how can you apply as much of your current go to market strategy? To a new market as possible. I think that ensures your smoothest transition. Oh, I did have one more last, last thing on this from me is just, even if you do all the research, you have the right product market fit with this new segment.
Just be a little bit wary about jumping too fast. Even if all the value propositions are right, you have the right channels in play, all that stuff. It will still take some time to build. And so if you do a hard shut off of your current, like you just shut down your current go to market completely and just expect this new market to carry you right and to, to make things to give you a lift, that's not necessarily going to happen.
You still have to either build your market or cement your position within the market before real results start coming in. So think of this as a long term play that you need to, you'll need to facilitate both if you really want a smooth transition.
Stijn Hendrikse: Well, let's just list all the differences. kind of attributes that go into an ICP. So you can go into the upper left quadrant along so many different vectors. The easiest and the ones everybody, of course, understands is other parts of the world, right, geographies. But language is a little different.
It's either more a certain place in the world or is it a certain language? Is it a certain local need. Regulatory needs in certain parts of the world. Those could all be types of geographical expansion. Technographic is usually about, hey, maybe your, your solution now integrates really well with a certain type of CRM solution, and maybe there's three other solutions that you could also build integrations with without having to do a ton of product investments where you basically have the same technology need, but you're just going to position yourself as also integrating with some other technical capabilities.
Size of customers, of course, is very common use cases or jobs to be done. And then maybe. Even the way you sell. If you, if you go from a marketing, let growth model to sales, let growth, it might mean you're now able to go after a different type of client, which is with the same product, same solution.
But when you're adding a product, let growth motion to your go to markets, all those are versions of going into new directions in the upper left corner.
Brian Graf: And even if. If you're doing research on your customers. And you find that there's this new persona that ends up being a really avid user or finding a ton of value in your product that you just didn't know about.
The ICP could look exactly the same, right, but you're messaging and positioning changes according to that new persona. That could absolutely be a market expansion.
Stijn Hendrikse: Yeah, if you think about it, but Uber at some point added things that were more lower right, quite a new product. Like if you add food delivery to transporting people, that's a new product, you need new capabilities, etc.
But if you're basically saying, hey, I'm going to add from just UberX, I'm going to add Uber Black. Right. You may not need any new product. It's just a new segment of the market where you have a little bit of a new persona as a business user, maybe instead of a private user, et cetera.
Brian Graf: So now that, you know, we'll say that you've considered expanding your market, you've decided that it's the right idea.
You have that. That small sample size in your company of customers. And you're, you're saying, okay, let's go. What initiatives would you say have worked best when expanding your market? Are there things that you need that you think are really important to do before actually launching the product in the new market to prep?
What have you seen work really well in expanding your market?
Stijn Hendrikse: Yeah, here I would refer back to, it's like you, you, you did when you started your initial. Growth strategy, you have to achieve product market fit. You have to find the beachhead that's confirmed by people, not only. Using your product.
But they like using it. They tell others about it. Like they pay for it. They keep paying for it. All those indicators have to be true against, you have to kind of go through those same milestones. And that is really confirming product market fit. And the way you do that is through, you know, customer interviews to build testimonials.
To understand how customers use your product in a very deep way. Which means you can, you know, maybe apply that to your onboarding process and get customers to experience value as fast as possible. So all those things are part of building out that new. Focus on the new part of the market.
And then there's, yeah, maybe you need different types of partnerships. There might be different types of partners who can sell the product, who can give you access to the market, maybe easier than you could do this yourself. So those are just a couple of examples.
Brian Graf: I think especially talking to as many customers as possible will be key, especially when doing a lot of the research for marketing, market expansion.
I do think, you know, customer interviews are great, because they'll tell you why people should buy you. And you can You can mold your messaging around that, but also if you've had any closed lost, you know, deals that didn't end up making it through and ended up choosing other competitors, it's really useful to know why they didn't choose you so that you can either adjust your messaging accordingly or start thinking about any product updates that need to occur in order to maximize your chances there.
I also think it's worth considering how fast you want to actually go to market. If this is something that you're expecting to hit and get traction within a quarter or two. That's a decently fast entrance, and so you will need to expect to almost pay for that entrance. You'll need to either, as Stijn was saying, leverage partnerships or have a strong ad budget or something.
You will kind of need to pay to play to a certain extent, unless maybe you have a really strong budget. Brand that you can leverage and people already kind of know of you. They just don't know that you're in their market alternatively. Right. You can kind of slow play your entrance and start to go the organic route, start to build a lot of thought leadership contents and get people to start trickling into your site and almost build, build a captive audience if you will.
Right. But this will take some time, especially if you don't have a strong brand to back that up. Right. You again are starting anew. Go to market strategy from scratch almost. And so just have that in mind. If you're not willing to pay for a large and fast entrance, you're going to have to play the slow game, which is absolutely worth playing, but you're going to have to invest that time and capital upfront to make it successful. And actually brings us into the next topic that I wanted to bring up, which is, you know, the market expansion is a whole company effort.
It's not something that you can just do with marketing or just do sales. And a lot of the issues that can come or kind of can expose themselves in an expansion come from either mistiming or misalignment of teams and their ability to go to market. So just give me your thoughts on what you think, you know, you would need as the CEO or the owner to, to get lined up internally before.
Stijn Hendrikse: First we started with this topic. Your lower left quadrant, the current ICP with your current needs to be well, well optimized. You need to be convinced that your deal size cannot go up much more, that your conversions are very good throughout the funnel, that your speed of funnel is pretty good, that your team is really focused on growing the size of the funnel because all these other things have been optimized already.
Once you've done that, then, yeah, the trust that I see by just recognizing that we have 10, 15, 20 customers that are really, really happy in this new market segment is enough for me to say, Hey, let's, let's give it a try. Let's, let's do a pilot and let's invest.
Brian Graf: And I do think, right, even once you've made that decision, just making sure that each department.
Especially your go to market departments that have aligned on the same strategy. They're all speaking the same language. They all have the same idea in terms of what the value propositions are, what the positioning is, what the messaging is. What materials are that they need to go to market and are already at the same time.
You don't want to go to the market with a marketing team that's ready, but a sales team that's not right. In order to make sure that, you can maximize this. And also that I think you mentioned this earlier, but that they have dedicated resources for the pilot. It's not something that somebody is going to do as a side job, you know, on, on nights and weekends, only if they feel like it.
This has to be something that's a priority for your organization. So we've, we've talked through. A few ideas on how you can execute a market expansion, but what are some of the risks that you should look out for specifically when pursuing this strategy?
Stijn Hendrikse: We often see that product market fit is defined a little bit loosely by, but especially people who are excited about the qualities of their product and who think their solution is going to be so good for a large part of the market that they haven't proven yet.
And just being, yeah, being, being super humble about that. is a really important risk factor or a way to mitigate risk. And then I think keep things relatively straightforward. And if you have 10 clients now, get to 50. Right, and don't overthink it, and, but that's how you start, and it's hand to hand combat, it's daily focus, it's not something you try for four or five months and then hope you, it worked.
No, you can look one, two, three weeks at a time. Are you making progress? Is our thesis holding up? Is it resonating?
Brian Graf: I think one of the things that I have seen in the past that has bitten founders and executives, is, for lack of a better word, it's almost a hubris about Their product and how useful it is to this new market.
It's worked with our current market in the past. And so it has to work. We have to differentiate in this new market because why wouldn't we, I think going in with a little bit more of a cautious view, is useful. And just making sure that you're really prepared to go up against strong competitors and with discerning customers and prospects, I think is really useful.
And to your point, right, this is a, won't be just a magic lever that you can pull and everything, everything works out and you just instantly get a lot of revenue. You'll need to. Treat it as a daily exercise, be really conscientious about it and start small, right, and build from, build from the wins that you get and constantly test and refine your hypothesis as you go.
Stijn Hendrikse: Yeah, you got to be careful, you got to commit. But then on the other hand, the upside is so clear when you, even when you're in a crowded market, Brian, if there are hundreds of other providers who are catering to the same types of clients, you only have to do it better than them. You don't need to.
Compete with all of them at the same time and the smaller you make the niche, the smaller you make the subsegment, the easier it is for you to convince those people that you're only focused on them, which instantly makes you a better option than all the other providers who may not have that focus.
Who may have a better product. The product might actually have features that you don't have. But if they don't just focus on that smaller part of the market, you're going to win.
Brian Graf: Sorry for the morbid analogy, but you don't have to outrun the bear. You just have to outrun your friends. You just need to make sure that you are better and especially better positioned for your target market, right, and make sure that you have a segment that you can really win and become their champion.
Stijn Hendrikse: And let's go back to the, maybe in kind of wrapping up, the retail clothing example. You're not going to compete with Nordstrom or Macy's or a big department store on the assortment, right, and the amount of sizes they have available.
There's no way you're going to do that. But if you're basically the only one who says, I'm only focused on, you know, identical twins, and in not only in the mall, but in the city that you're in, you're the only store that does that, You might have people who only walk who walk in your store first before they go to the Nordstrom Even though they have more choice over there because they know that you know what they need specifically having a pair of twins at home
Brian Graf: Okay, so I guess to wrap it all up right when you're thinking about going into a market expansion. Make sure that you are capitalizing on The momentum that you've already built right in your current market, look for initial indicators of success. A small customer base from the sub segment that has been really happy, low cost of service.
Low customer acquisition costs. It's fast sales cycles, all the things, all the identifiers that you look for. Right. And make sure that your teams are aligned. The timing of the entrance is, is agreed upon and that you are willing to invest upfront, basically in this new market to make sure that it can get the capital and the attention it deserves to be successful.
But if you can do that and you can be patient. And, and make sure that you have the dedicated resources focused on the strategy. It can absolutely pay off. And diversify your revenue stream. And allow your brand and company to really, really expand and grow in the market. Anything else to add?
Okay. Thank you so much. Next time we are on to produce R and D. So looking forward to it.
Stijn Hendrikse: Thank you, Brian.
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, thank 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.
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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