Reach Beyond Existing Demand Team 5 Katelyn Reed Monica Longer Kristen Hodge Venessa 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

Noncustomers To 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 Golf Noticed many people did not like to play golf Discovered 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-continued Existing 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 Noncustomer Soon-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 Points Noncustomers 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’d Apple JCDecaux ◦ 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 Nonconsumers Farthest 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 Catchment Reach beyond existing demand as you start to use new strategies If 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