Reach Beyond Existing DemandTeam 5Katelyn ReedMonica LongerKristen HodgeVenessa Rodriguez

How do you maximize your blue ocean?

Third principle of blue ocean strategy◦Reach beyond existing demand.

Companies should challenge two conventional practices◦Focus on existing customers◦Strive for finer segmentation to

accommodate buyer differences◦Risk of creating too-small target

markets through segmentation

NoncustomersTo maximize blue ocean

concentrate on noncustomers instead of existing customers

Instead of focusing on customer differences focus on customer similarities in what they value

Companies can reach a demand that did not exist before

Callaway GolfNoticed many people did not like to

play golfDiscovered that golf took too much

practice for those that just wanted to have fun

The tiny ball is extremely hard to hit with a small head on the golf club

Solution: Big Bertha◦Pleased existing customers and brought

new customers. Only exception-Pro Golfers

Callaway Golf-continuedExisting customers may have

been dissatisfied with their golf game but knew they game is difficult and accepted it

By targeting noncustomers, Callaway Golf gave the option to not accept the difficulty of the game

To reach beyond existing demand think about noncustomers before customers.

First-Tier NoncustomerSoon-to-be noncustomers

◦Minimally use the current market as they search for something better

Ex.: Pret A Manager, British Fast Food Chain◦For the customers that want lunch

fast, fresh and healthy, and at a reasonable price

First-Tier Key PointsNoncustomers tend to offer far

more insight into how to unlock and grow a blue ocean that existing customers

Focus on reasons people want to leave your industry and not on the differences between them

Second Tier Noncustomers“Refusing” noncustomers who

consciously choose against the market.People who either do not use or cannot

afford the current market offerings because they find the offerings unacceptable or beyond their means. So, they find other ways of dealing with their needs or leave them unsatisfied.

Look for commonalities among noncustomers.

Second Tier Noncustomers Cont’dAppleJCDecaux

◦Outdoor advertising was only viewed in a transitory way—on buses or taxis, where exposure time was very low.

◦Street furniture in downtown areas—stationary locations where people tended to linger, such as bus stops.

Win-win situation for companies and municipalities.

Became the highest-growth market in the overall display advertising industry

Third-Tier NonconsumersFarthest away from the industry’s

existing consumers◦The industry has always assumed

their needs belonged to other industries

Ex. Teeth Whitening◦Most thought it was only provided by

dentist, but when oral care companies found they had the ability to deliver the same results, the market exploded

Third-Tier Cont. U.S. defense aerospace industry

◦Higher costs combined with smaller budgets left the military without a plan to replace the aging fighter aircrafts.

Each Branch had their own idea of ideal fighter planes◦Navy wanted durability and maintainability◦Marines wanted short takeoff vertical

landing and robust countermeasures ◦ Air Force wanted the fastest and most

sophisticated

Third-Tier Cont. The Joint Strike Fighter (JSF) program

◦ Challenged this practice by looking at all segments as unexplored nonconsumers that could be aggregated into a new market of higher performing, lower-cost fighter planes.

◦ Searched for key commonalities of the 3 branches Highest cost was avionics (software) and engines. The

shared use and production of these components promised huge cost reductions.

◦ Aimed to build one aircraft for all 3 divisions by combining key factors and reducing or eliminating all else. Would lead to a drop in cost and price per aircraft, while

having a leap in performance

Third-Tier Cont. The Joint Strike Fighter (JSF) program cont.

◦Reduced cost per aircraft from $190 million to $33 million

◦Have superior performance from any of the top-performing aircraft for the 3 branches.

◦Maintains the distinctive strengths of each branch Agility, speed, maintainability, durability,

countermeasures, and STOVL

Lockheed Martin was awarded the $200 billion dollar contract (largest in military contract history) over Boeing.

Go for the Biggest Catchment

No set rule on which tier should be the most important

Varies across industries and over time

Find commonalities throughout all three tiers so you can reach a larger demand

Challenge existing customers and existing strategic orientations such as the competition

Go for the Biggest CatchmentReach beyond existing demand

as you start to use new strategiesIf there are no opportunities then

concentrate on existing customers but be aware that a competitor could create a blue ocean, attracting some of your existing customers

Must profit to create a win-win situation