Class is in Session: MRKT420: Ansoff's Matrix and Cannabis Growth Strategy

By Claire Kaufmann | January 3, 2024

After years of client-facing, quota-chasing cannabis industry madness, I am now a member of the teaching faculty at Oregon State in the College of Business. I am still doing consulting work, but teaching again (I was a Teach for America fellow twenty something years ago,) has been refreshing to say the least. My KPIs now are measured in how well I prepare my students for the real world.

I’ve also gained a renewed respect for some sage, tried-and-true marketing tools. Teaching these tools to my students has given me a new way to look at problems in our own industry.

One of the biggest challenges facing many cannabis companies in 2024 is how to grow in such an unforgiving marketplace.

Ansoff’s Matrix is a tool to help marketers and product developers do just that:

Ansoff’s Matrix

A tool to help marketers and managers evaluate options for strategic growth. (Created by Igor Ansoff, 1957. 1957, Strategic Diversification.)

market penetration

The Market Penetration strategy aims to sell more of your existing products to your existing customers in your existing markets.

Market Penetration is often considered the safest of the four strategies. It is mostly achieved in cannabis by acquiring a rival. For example, after doing research, Oregon firm Tumalo Industries, realized customers rarely shopped outside of a 1-2 mile radius from their home. They decided to acquire all of the dispensaries in a two mile radius in desireable neighborhoods, thereby capturing all sales.
Other tactics to foster market penetration are lowering prices (not really an option in today’s cannabis market,) and increasing points of distribution within your existing market.

product development

Product Development is when you aim to sell new products to existing customers in existing markets, thereby gaining a higher share of wallet overall. For example, when Wyld has used the product development strategy to gain share both in dispensaries and in natural foodstores. Their Good Tide gummies help them gain share in dispensaries and their CBD beverages and CBG gummies help them gain greater share in traditional grocery.

We also see edibles companies like Wana using product development strategy with their need-state based product “Quick” gummies.

Product Development as a process is expensive, and even if you test and test, you can’t guarantee that your customer is going to love it, or that it won’t cannabalize your existing sales. It should be done strategically, with a specific customer segment already in mind.

market development

A Market Development strategy aims to sell more of your existing products to new customers in new markets.

In cannabis, any time a brand, retail or product, expands to a new a state they are using a Market Development strategy to make it happen. Market Development, while considered lower risk, can also be costly and full of unexpected hurdles. (Obviously not a shock to anyone in cannabis.)

diversification

A firm that diversifies decides to sell new products to new customers and/or in new markets. This is a very risky move and rarely succeeds without a huge market effort and budget, however, sometimes it is the only option to mitigate business problems.

It is important to note that whatever path you choose, your decision should drive your marketing plan, your strategy and your tactics. For more information or more marketing tools feel free to contact me or keep reading! Thanks for stopping by!