REACHING BEYOND EXISTING

DEMAND

Team 5

Jason Bullard
Grant Gerhardt
Patrick Kirkland
Laura Moore
Jeffri Vaughn
Chet Visser
• No company wants to venture beyond a
red ocean only to find itself in a puddle

• How do you maximize the size of the Blue

Ocean you want to create

– By Reaching beyond your existing demand

• To achieve the greatest demand a
company must:

– Focus on existing customers

– Drive for a finer segmentation to

accommodate buyer differences
• Typically to grow their market share
companies try to retain and expand
existing customers

– This practice often leads to two things:

• Finer Segmentation

• Greater Tailoring of offerings to meet customer

preferences
• As the competition increases so does the
amount of customizations offered by the
company

– This practice often leads companies into

creating too-small target markets
 Maximizing the Blue Ocean
• To maximize the size of their Blue Ocean
companies need to reverse course and consider:

– Looking to Non-Customers

– Building powerful commonalities on what customers

buy

• Doing this will allow companies to reach beyond

existing demand to unlock a new mass of
customers
• Example 1: Callaway Golf

– Understood that golf was very hard and

frustrating for novices

– They used this knowledge to create new clubs

that were easier to hit and made golf enjoyable
for beginners

– By doing this they generated a massive set of

new customers
• Example 2: Commuter Airlines

– Saw an opportunity in connecting many

underserved smaller communities to large
cities

– Used this information to create an entirely

new business in the airline industry

• Short, usually less than and hour long flights that connect
smaller airports to large airports to make traveling much
easier and more efficient for people that lived away from
large airports (Ex. Lubbock, Amarillo, and Abilene)
 Three Tiers of Non-customers
• These non-customers can be transformed into
customers and offer a great opportunity to
expand your business

• Tier 1
– Closest to your market
– Buyers who minimally purchase an industries
offerings out of necessity
– Do not perceive themselves as customers
– Are willing to jump ship or multiply their purchase
frequency depending on your product’s value
• Tier 2
– Mid Range from your market
– Refuse to use an industries offerings
– They see the need for an industries products
but do not wish to use them

• Tier 3
– Farthest from your market
– Never thought of your industry’s offerings as
and option
Takeaways
• Reach Beyond existing demand to
increase your size

• To many customizations can lead to too

small of markets

• The three Tiers

 First-Tier Noncustomers
• Soon-to-be noncustomers
• Minimally use the current market offerings
to get by as they search for something
better

• When they find better alternatives, they

will eagerly jump ship

• Sit on the edge of the market

 First-Tier Noncustomers

• As the number of first-tier noncustomers

increases, the market becomes stagnant
and develops a growth problem

• Within these customers is an ocean of

untapped demand waiting to be released
• British fast-food chain
• French for “Ready to Eat”
• Specializes in sandwiches, baguettes, and wraps
• Opened in 1986 in London, arrived in America in
2000 in New York City
• About 150 Pret shops, most in the UK
• Expanded its blue ocean by tapping into the
demand of first-tier noncustomers
• Don’t franchise
 Pret
• Before Pret, professionals in European city
centers frequently went to restaurants for
lunch
• Sit-down restaurants offered a nice meal and
setting
• Number of first-tier noncustomers was rising
• Need for healthy eating and cheaper options
instead of eating out in restaurants
• Some were grabbing something on the run,
brown bagging, or skipping lunch
 Pret

• First-tier noncustomers were in search of

better solutions

• Three key things:

– Wanted lunch fast
– Wanted fresh and healthy
– Wanted reasonable price
 Pret
• Pret formula is simple
– Offers restaurant-quality sandwiches made
fresh every day from only the finest
ingredients
– Makes the food available at a speed that is
faster than that of restaurants and even fast
food
– Delivers this in a sleek setting at reasonable
prices
 Pret
• Along the walls are clean refrigerated
shelves stocked with more than thirty
types of sandwiches made fresh that day

• Average price $4-6

 Pret
• Can also choose from salads, yogurt,
parfaits, blended juices, and sushi
• Each store has its own kitchen, and non-
fresh items are made by high-quality
producers
 Pret
• Make stuff fresh so they can sell fresh
– Old fashioned but works well
• Donates sandwiches to charity rather than
keep them over to sell the next day
– Food doesn’t have “shelf life” dates
 Pret
• In NYC store
– Baguettes from Paris
– Croissants from Belgium
– Danish pastries from Denmark
 Fast Food vs. Pret
• Pret speeds up the customer ordering
experience
• Fast food
– Order, Pay, Wait, Receive, Sit down
• Pret
– Browse, pick up, pay, leave
• On average, customers spend just 90 seconds
from the time they get in line to the time they
leave the shop
– Does not make to order or serve customers
 Restaurants vs. Pret

• Restaurants have been seeing stagnant

demand

• Pret has been converting the mass of first-

tier noncustomers into core thriving
customers who eat at Pret more than they
used to eat at restaurants
 Lesson of Pret

• Noncustomers tend to offer far more

insight into how to unlock and grow a blue
ocean than do relatively content existing
customers
• Today, Pret sells more than 25 Million
sandwiches a year

• 2002 Sales of $160 Million

• McDonalds bought 33 percent share of the
company
 First-Tier Noncustomers

• What are the key reasons first-tier noncustomers

want to jump ship and leave your industry?
– Look for commonalities across their responses
• Like Restaurant eaters’ three similarities
– Fast Lunch
– Fresh and healthy
– Reasonable prices
– Focus on commonalities and not differences
• Desegment buyers and unleash an ocean of
latent untapped demand
 Second-Tier
Refusing Noncustomers
• Refusing customers are people who either
do not use or cannot afford to use the
current market offerings because they find
the offerings unacceptable or beyond their
means
 JCDecaux

• Outdoor advertising was originally limited

to billboards and transports
– People only saw the ads for a short time
– Cannot include comprehensive messages
needed to promote new names and products
– Relatively expensive
 JCDecaux

• JCDecaux realized that the lack of

stationary downtown locations was the key
reason outdoor advertising remained
unpopular and small
• JCDecaux researched the issue and found
that municipalities could offer stationary
downtown locations such as bus stops
– People often wait at bus stops for a few
minutes and therefore had more time to be
influenced by the ads
 JCDecaux

• JCDecaux provided street furniture and its

related maintenance and upkeep to
municipalities for free
– This gave them exclusive rights to display
advertisements on the furniture
 JCDecaux
• JCDecaux’s solution let everybody win
– Municipalities gain free furniture and its
related upkeep
– JCDecaux gains rights to advertise on the
furniture
– Previously refusing noncustomers pay
JCDecaux for advertising on the furniture
• Ads have longer exposure time
• Ads can have more detailed messages
• Ads can be put up in 2-3 days rather than about
15 days for billboards
 Third Tier of Noncustomers

• Tier 3 is the “unexplored noncustomers

who are in markets distant from yours”

• This is as far away as you can get from

your market, including your usual,
original, or existing customer base
 U.S. Defense Aerospace
Industry
• This is the example in the book
• The Marines, Navy, and Air Force needed different
fighter jets for different reasons. And the U.S. has been
criticized for not being able to control aircraft costs
• Much research was done to find out what each branch
needed most in its aircraft, and combined each one’s
attributes
• To fix this problem Lockheed Martin was given the job
over Boeing and a single fighter jet that used to cost
$190 million would now cost only $33 million
Who is sick of me talking about
The Home Depot?
• Well too bad!!
 Home Depot’s 3rd Tier
• Women!
– "Her Depot," the store will abandon Home Depot's
warehouse aesthetic in favor of shorter, "cleaner"
aisles that emphasize home organization and interior
design
• (Consumerist.com)

– Home Depot opened up Home Depot Design Centers

for couples, but are definitely geared towards women
 Home Depot’s 3rd Tier
• Hispanics!
– Home Depot Launched its Spanish website on
November 17, 2008
– A study of English and Spanish-language consumers
conducted last year by Forrester Research Inc. found
that one-fourth of Hispanics must be served in
Spanish if retailers want their business. More than
half of Hispanics who shop online—7.1 million people,
by Forrester’s count—prefer Spanish
(Commercialalert.org)
So…

• Always find out who you’re not catering

to…

And find a way to cater to them!!!!

Go For The Biggest Catchment

There is no hard-and-fast rule to

suggest which tier of noncustomers
you should focus on and when
 The Biggest Catchment

• Because the scale of blue ocean

opportunities that a specific tier of
noncustomers can unlock varies across
time and industries, you should focus on
the tier that represents the biggest
catchment at the time
 The Biggest Catchment

• You should also explore whether there are

overlapping commonalities across all three
tiers of noncustomers

• In that way, you can expand the scope of

latent demand you can unleash…
 The Largest Catchment

• When there are overlapping

commonalities, you should focus not on a
specific tier, but instead look across the
tiers

• The rule here is to go for the largest

catchment
 Creating Your Blue Ocean

• The natural strategic orientation of many

companies is toward retaining existing
customers and seeking further
segmentation opportunities

• This is especially true in the face of

competitive pressures…
 Creating Your Blue Ocean

• This might be a good way to gain a

focused competitive advantage and
increase share of the existing market
space, but it is not likely to produce a blue
ocean that expands and creates new
demand
 Creating Your Blue Ocean

• It’s not wrong to focus on existing

customers or segmentation

• Try to challenge the existing, taken-for-

granted strategic orientations
 Creating Your Blue Ocean
• To maximize the scale of your blue ocean,
you should first reach beyond existing
demand to noncustomers

• If no such strategies can be found, you

can then move on to further exploit
differences among existing customers…but
you may end up landing in a smaller
ocean
 The Blue Ocean

• It is not enough to maximize the size of

the blue ocean you are creating

• You must profit from it to create a

sustainable win-win outcome
 Blue Oceans on the Course
• The Callaway Big Bertha
• The Nike Sumo2 — first square-shaped
driver

• The Callaway HX golf balls—designed with

hexagonal dimples to increase the total
dimple surface area

• How about ladies’ golf clubs for reaching

across tiers?
 Golf Notes
• 1618—feathery golf ball
• 1826—American hickory is shipped to
Scotland to manufacture shafts

• 1848—the gutta-purcha (or guttie) ball

replaces feathery

• 1902—first grooved set of clubs

• 1929—steel shafts are legalized
 References

• Welcome to Pret A Manger New York. 15

Feb. 2009 <http://www.pret.com/us/>.

• Kim, W. Chan, and Ren Mauborgne. Blue

Ocean Strategy : How to Create
Uncontested Market Space and Make the
Competition Irrelevant. New York: Harvard
Business School P, 2005.