Chapter 3: Reconstructing Market Boundaries

Introduction: In this chapter, the focus is on how companies can systematically reconstruct market boundaries to create a Blue Ocean. By looking across conventional market definitions and exploring alternative factors, businesses can identify new opportunities and break away from the constraints of traditional industry boundaries.

The Six Paths Framework (Revisited): The chapter begins by revisiting the Six Paths Framework introduced in Chapter 2. The Six Paths represent different angles through which companies can gain new insights into market opportunities. To recap, the Six Paths are:

1. Look across Alternative Industries
2. Look across Strategic Groups
3. Look across Buyer Groups
4. Look across Complementary Products and Services
5. Look across Functional-Emotional Orientation
6. Look across Time

By systematically analyzing these paths, companies can uncover hidden factors that shape buyer preferences and reveal unmet needs that are not addressed by existing market players.

Focus on the Third Path: Look across Buyer Groups: In this chapter, special attention is given to the third path: looking across different buyer groups. Instead of viewing the market as a homogeneous mass, companies should recognize that different groups of buyers have distinct needs and preferences.

Three Tiers of Non-Customers: The authors introduce the concept of the “Three Tiers of Non-Customers.” These non-customers are individuals or groups who are not currently using a company’s products or services, but could become customers if certain conditions were met. The Three Tiers are:

1. Tier 1: Soon-to-be non-customers – These are buyers who are on the brink of leaving the industry because they perceive that the industry does not meet their needs effectively.
2. Tier 2: Refusing non-customers – These are potential customers who consciously choose not to use the current offerings in the market because they see better alternatives elsewhere or consider the offerings irrelevant.
3. Tier 3: Unexplored non-customers – These are individuals or groups who have never considered the industry’s offerings as an option due to various reasons.

Converting Non-Customers into Customers: The key to creating a Blue Ocean lies in understanding and converting these Three Tiers of Non-Customers into customers. By identifying the factors that deter these non-customers from using existing products or services and offering a compelling value proposition, companies can expand their customer base significantly.

Example of Non-Customer Conversion: An example cited in the book is the case of Cirque du Soleil. They successfully attracted non-customers from the traditional circus industry, as well as theatergoers and corporate clients, by creating a unique entertainment experience that catered to their specific preferences.

Unlocking New Market Space: By targeting non-customers, companies can discover new market spaces that were previously untapped. This process of unlocking new market space is essential for creating a Blue Ocean, as it enables businesses to attract customers from previously overlooked segments and differentiate themselves from existing competitors.