Amanda Long Ashley Gonzenbach Brian Byrne Diana Perkins

Maximizing the Size of Your Blue Ocean  Third Principle of Blue Ocean Strategy - Reach beyond existing demand  Two Strategy Practices - Focus on existing customers - Drive for better segmentation to accommodate buyer differences

Three Tiers of Noncustomers

First Tier of Noncustomers  Noncustomers closest to your market  Sit on the edge of your market  Buyers who minimally purchase an industry’s offering out of necessity but are mentally noncustomers

First Tier of Noncustomers  Noncustomers waiting to jump ship and leave the industry as soon as the opportunity presents itself  If offered a leap in value, customers would stay and increase their purchases

First Tier of Noncustomers Pret A Manger  Expanded blue ocean by tapping into first tier noncustomers  Offers lunch fast, fresh and healthy, at a reasonable price

Second-Tier Noncustomers  People who either do not use or can’t afford to use the current market offerings because they find the offerings unacceptable or beyond their means.  Look for what these customers have in common.

Second-Tier Noncustomers  JCDecaux Outdoor advertising company Integrated street furniture and long term advertising. Number one street furniture-based ad space provider world wide.  Kraft Founded in 1903 ○ Cheese was their main product Started branching into new areas every few years ○ Incorporated snack foods and quick dinner ideas.

Third-Tier Noncustomers  Farthest away from an industry's existing customers  Not thought of as potential customers by any in the industry  Their needs have always belonged to other markets

Example: Whitening Strips  There was a long held assumption tooth whitening was a service provided only by dentists  Oral care consumer product companies never looked at the needs of these noncustomers  They found an ocean of demand waiting to be tapped  They found they had the capability to deliver safe, high quality, low-cost tooth whitening products  Market Exploded

Which Tier To Focus On?  There is no hard and fast rule to suggest which tier to focus on  Focus on the one that represents the biggest catchment at the time  Try to find commonalities across all three

Going Against The Norm  Natural strategic orientation at many firms is toward retaining existing companies  Might be good, but wont produce a blue ocean that creates new demand  Maximize the scale of your blue ocean you must first reach beyond existing demand

Class Exercise Analyze the example and decide which tier

Take Away 1. The third principle of blue ocean strategy: Reach beyond existing demand 2. Think NONCUSTOMERS before customers 3. Tier One: Minimally use current market offerings Tier Two: Those who refuse industry’s offerings Tier Three: Not thought of as potential customers