Chapter 5: Reach Beyond Existing Demand

Introduction: Chapter 5 focuses on the importance of reaching beyond existing demand to create a Blue Ocean. The authors argue that companies can unlock significant growth opportunities by attracting non-customers and converting them into loyal customers.

The Limits of Existing Demand: Many companies concentrate solely on existing customers and try to gain market share by competing for the same pool of buyers. This approach leads to intense competition in crowded markets and limited growth potential. However, the Blue Ocean Strategy suggests that the real opportunity lies in tapping into non-customers and creating new demand.

Three Tiers of Non-Customers (Revisited): The chapter revisits the concept of the “Three Tiers of Non-Customers” introduced in Chapter 3. These non-customers represent different groups of people who are not currently using a company’s products or services, but could be potential customers under the right conditions.

1. Tier 1: Soon-to-be non-customers – These are customers who are dissatisfied with the current offerings in the market and are on the verge of leaving.
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 to their needs.
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.

Strategies to Attract Non-Customers: The chapter presents strategies for attracting non-customers from each tier:

1. Reaching Tier 1: Companies should focus on understanding the pain points of soon-to-be non-customers and addressing their unmet needs before they switch to competitors. By offering better value, companies can retain these customers and possibly convert them into advocates.
2. Reaching Tier 2: To attract refusing non-customers, companies must offer a value proposition that significantly outperforms the competition or provides unique benefits not available elsewhere. This requires a clear understanding of what refusing non-customers value the most.
3. Reaching Tier 3: Companies can reach unexplored non-customers by challenging industry assumptions and creating a value proposition that appeals to entirely new buyer segments. This involves identifying potential customers who have different needs and preferences than those traditionally served by the industry.

Example of Attracting Non-Customers: One example in the book is the case of Cirque du Soleil, which successfully attracted non-customers from both traditional circuses and theatergoers. By offering a unique blend of artistic performances and acrobatics, Cirque du Soleil created a new market space that appealed to a broader audience.

Unlocking New Market Space: By targeting non-customers, companies can unlock new market space and increase demand. The Blue Ocean Strategy encourages businesses to think beyond the current customer base and identify groups that have been overlooked or underserved by existing offerings.