Understanding Non-Customers -A Blue Ocean Strategy for Business Growth
Nokia was a market leader in mobile phones in the early 2000s with a huge customer base and designs to meet customer needs. They had an efficient research and design team. Their designs were user-friendly and made after extensive research.
Nokia thought they were keenly observing people, finding out opportunities and solving the problems. Unfortunately, they became irrelevant sooner than they could predict and respond.
Clayton Christensen says, “Best firms succeeded because they listened responsibly to customers, invested aggressively in technology, manufacturing abilities, designed wonderful products to meet the next generation needs. Same best firms failed after some time, because they listened to the SAME customers, invested again, designed again to meet NEXT GENERATION needs”.
If you are just focussing only on existing users, your industry may soon be ripe for disruption. To evolve and build a sustainable business, you need to focus on non-customers too.
Blue Ocean Strategy(BOS) also advises us to focus on ‘Non-customers’ to create ‘Radical Value Innovations’.
BOS adds. “Focusing on existing customers will break the existing market into finer segments, forcing us to tailor the offerings further, and reducing the market further. To break away from this, the first step is to shift your focus from “Customers” to “Non-Customers”.
BOS talks about three tiers of noncustomers
- First Tier — “Soon-to-be” non-customers who are on the edge of your market,
- The second tier — “Refusing” customers who consciously ignore your market
- The third type — unexplored non-customers who are in markets distant from others.
OBSERVING NONCUSTOMERS -STARBUCKS
In the year 1994, many coffee businesses copied the Starbucks business model and the logo. It threatened the brand’s growth. Howard Schultz had to do something quickly to jump to a new level. He believed that the best way to jump far ahead of the competition was not to fight his competitors on the same features or elements but create a new dimension where there would be no competitive forces. He was looking for a strategy to grow the market rather than just aiming to grow the company’s market share. If our goal is to increase our brand’s market share, we would be unknowingly looking at our competitors & we may not succeed.
The best way to expand the market is to attract non-customers. Howard pondered on the ways to attract non-customers by leveraging his existing infrastructure & brand value for new coffee products.
Frappuccino-Starbucks’ user research unit observed that many non-customers preferred a kind of blended coffee beverage. Based on the insights, the beverage research team experimented a blended brew by adding and mixing various ingredients. Ultimately, they arrived at a distinct combination and launched the beverage in a few stores. Based on the results, they tweaked the drink. The results were great. Later, they propelled it nationwide in the year 1995.
Starbucks team expected to sell around 1,00,000 bottles in the first week though they sold around 2,00,000 drinks. The iconic ‘Frappuccino’ drink was born. A couple of weeks later, the sales were around 8,00,000 units.
Frappuccino shifted the trajectory of the company by drawing in new customers who were not usually coffee drinkers and filled its stores in afternoons and during warm weather when the coffee business was typically slow. Starbucks is no more reliant on the holiday season.
After seeing the sales, Howard Schultz suggested the idea of a bottled Frappuccino in collaboration with Pepsi. By the summer of 1996, Starbucks® bottled Frappuccino® chilled coffee drinks were arriving in grocery stores. Pepsi’s massive distribution network moved Starbucks brand name seamlessly into the mainstream market and drastically improved its brand awareness.
The Blended Product -In the early 1990s, Starbucks’ R&D team discovered that they could capture coffee’s flavour and aroma in a concentrated extract. When they ran the tests with coffee made by those extracts, the results were encouraging. This extract opened a whole new possibility for Starbucks — It was a powerful weapon to grow the coffee market among the non-customers. The brand could easily fight against non-consumption.
Starbucks began adding coffee extract in a wide range of products -coffee-flavoured beer, coffee ice cream, ready-to-drink bottled beverages.
For Icecream Coffee, Starbucks partnered with Grand Ice Cream to leverage its nationwide distribution network. Aforementioned helped Starbucks to become the number one premium coffee ice-cream brand in the United States.
Instead of looking at competitors, Starbucks always found a way to grow the market by targeting new non-customers and built a massive competitive advantage.
OBSERVING NONCUSTOMERS -LE BON MARCHE
In 1848, 32-year-old Aristide Boucicaut was at the crossroads of his retail career. The intense competition, increasing-price wars, and shrinking profit margins had rendered his business unsustainable. He was looking for a solution to break-away from the competitive race.
Boucicaut saw a potential opportunity in the emerging middle class of that time, as they were getting wealthier from the Industrial Revolution. Before industrialization, only a few things were available in the market for owning. Mass production changed it. A lot of exciting things flooded the market. Middle-class people could now own more things. Boucicaut felt that this group of people aspired to belong to be a part of a higher class.
Boucicaut’s Noncustomers -The challenge was that every other shop owner would target this emerging middle class. Boucicaut had to dig his head below the surface and see things where most people would not explore to locate his ‘Non-Customers’.
After brief research and with his own experience, Boucicaut figured out his potential ‘Non-customers’ — Women from the emerging middle class and the upper class.
Why Women? -In the 1840s, Women of upper classes, emerging middle classes had no other sources of exciting activities or recreation other than visiting family tombs or friend’s homes along with her husband. They were bored -They needed excitement -They too needed space on their own. Women of the emerging middle class were desperate to fit into the upper class. Though they already owned things, they continued to acquire more and more things.
Moreover, Boucicaut had a wonderful understanding of his customer’s needs as he had been selling women’s clothing for more than Nineteen years.
So, Boucicaut launched his super-store ‘Le Bon Marché’ to meet the needs of women. None of the other stores had thought about this market segment. The store went on to revolutionise and disrupt the retail industry. Targeting a non-customer segment changed ‘Le Bon Marche’.
Note: The above content is part of the following book(Available on Amazon)-