Reach Beyond Existing

Demand
Chapter 5
Blue Ocean
IRAN MBA
 Maximize Size of Ocean
• How do you maximize the size of the blue ocean
you are creating?
– Reach Beyond Existing Demand
– By aggregating the greatest demand for the offering,
reduces the scale risk (size of market) associated with
creating a new market.
• To achieve this, challenge two strategic
practices. (Retain and expand existing
customers)
– Focus on Existing customers
– Drive for finer segmentation to accommodate different
buyer groups.
 Take a reverse course
• Instead of focusing on customers, look to
noncustomers.
• Ex. Callaway Golf looked to why people
had not taken up golf.
– Cost
– Hitting the ball accurately, hand-eye
coordination.
• Developed the Big Bertha, with large head, that
made it easier to hit the ball (greater sweet spot).
 Questions to Ask
• Where is your focus of attention:
– Capturing a greater share of existing customers, or on
converting noncustomers of the industry into new
demand?
• Do you seek out key commonalities in what
buyers value, or do you strive to embrace
customer differences through finer customization
and segmentation?
• To reach beyond existing demand, think
noncustomers before customers; commonalities
before differences; and desegmentation before
pursuing finer segmentation.
 Three Tiers of Noncustomers
• Differ in relative distance from your market.
– First Tier: Soon to be customers who sit on edge of
your market, minimal purchasers out of necessity.
They can be pushed into industry if opportunity
presents itself. If offered leap in value, frequency of
purchase would increase (ex. Golf Industry)
– Second Tier: Noncustomers who refuse to use your
industry’s offering. (ex. Sports enthusiasts who
choose to play a different sport)
– Third Tier: Unexplored noncustomers who have never
thought of your market’s offerings as an option (ex.
African Americans and golf).
 Three Tiers
First Tier : “Soon to be
customers”
Second Tier: “Refusing”

Second Third Tier: “Unexplored”

tier Third
First Tier tier
Your
market
 First Tier
• Looking for something better within more broadly defined
market.
• Ocean of untapped demand waiting to be released
– Ex. Subway restaurants, offered healthy alternative to fast food
restaurants (McDonalds is now copying).
– Survey existing and non-current customers.
• Lesson: Noncustomers tend to offer far more insight into
how to unlock and grow a blue ocean than do relatively
content existing customers.
– Look for commonalities across responses of noncustomers
– Focus on these, and not the differences between them.
 Second Tier
• Refusing noncustomers, do not use (current
market unacceptable) or cannot afford the use of
the current market offering.
– Ex. Media advertising on benches in cities while
waiting for bus. Offered free to city, but advertisers
who could not afford big billboards could afford these.
• Questions: What are the key reasons second-
tier noncustomers refuse to use the products of
your service or industry?
– Look for commonalities across responses. Focus on
these not differences.
 Third Tier
• Typically unexplored noncustomers have not
been targeted or thought of as potential
customers by any player in the industry.
• Needs and business opportunities were not
connected or thought to belong to another
market. Ex. African Americans with golf vs.
basketball.
• Example: Dental Care and teeth whitening gel.
 Go for the biggest Tier
• No specific tier to focus as the scale of the
blue ocean opportunities that a specific tier
of noncustomers differs across time and
industries.
• Focus on the biggest tier at the time.
• Explore if there are overlapping
commonalities across all three tiers of
noncustomers. (Ex. New technology
unlocks opportunities).