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Amanda Long Ashley Gonzenbach Brian Byrne Diana Perkins . Blue Ocean Strategy Chapter 5 Reach Beyond Existing Demand. Maximizing the Size of Your Blue Ocean . Third Principle of Blue Ocean Strategy - Reach beyond existing demand Two Strategy Practices - Focus on existing customers
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Amanda Long Ashley Gonzenbach Brian Byrne Diana Perkins Blue Ocean Strategy Chapter 5Reach Beyond Existing Demand
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
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