Marketing’s Next Frontier

The Background

• Turbulent times have hit both Europe and emerging country economies.

• The competition for a share of the consumer’s wallet is becoming more severe.

• In Chan Kim and Renee Mauborgne’s parlance, the Red Ocean is becoming more and bloodier.

Companies can only further extend or stretch their markers in many product fields through the creative application of the Blue Ocean Strategies.

What is Red Ocean?

• Any industry or market where multiple suppliers or products are competing is the Red Ocean.

• Competition is high and there is blood in the water as a result of the ongoing war between competitors.

• Strategies in the Red Ocean usually consist of lowering price or adding value to justify increasing price – both with the aim of increasing market share.

• After a while, all the competitors start to look the same because all you can see is the churn.

An Example of a Red Ocean

• A good example of this is the bombardment of Modern Trade ads we see on Press. They all offer the same thing: Discounts, Offers, Packages, Loyalty cards etc

• No differentiation

• The entire category I driven by Competitive pressures

• Therefore the Benchmark is competition and not Consumer gratification and meeting Consumer expectation

What does Blue Ocean look like?

• By contrast, the Blue Ocean is calm and peaceful.

• Nobody is there yet, the waters haven’t been disturbed (look closely, you may see an Apple bobbing gently in the breeze: Not much can compare with iTunes for a pure example of the Blue Ocean success!).

• Sounds like a pretty good place to be, and it is. Of course once the Blue Ocean exists, others will be drawn to it and try to emulate. But there is no competing against first place in a new market.

How do we find Blue Ocean?You don’t find it. You create it.

• 1. Start looking for non-customers• This is the first level of upside-down thinking, In any category

there are people who buy that product or service and then there are three types of non-customer:– Buys the product or service very rarely and resentfully– Has purchased the product or service once and had a bad

experience so will never buy it again– Has never bought the product or service before and has little

interest

So which segment of Non-Customers we should Target?

• Now, before you start thinking up all kinds of strategies to win over non-customer 1 and non-customer 2 – forget about it!

• If you start with them, you’re already swimming in the Red Ocean, trying to outsmart what very smart competitors have already tried to achieve.

• The goal and success of the Blue Ocean comes with attracting non-customer 3.

• This is largely due to the element of surprise. This type of customer never expected to like or want your product so when they do – they feel like they have discovered it themselves. They become immediate brand advocates.

So which segment of Non-Customers we should Target?

And what happens after you have attracted non-customer 3 and become a hit, is that types 2 and 1 will slowly move over as well and finally, you will even attract the customer of the old product or service.

Stop Benchmarking against Competition

• Don’t aim to out-perform the competition• This one can make marketers tear their hair out with anxiety when they

first read it. After all, the job of marketing is to analyze the competition, find the weaknesses and offer a superior product or service.

• That can certainly be the result of the Blue Ocean Strategy but it doesn’t work as a starting place.

• The same goes for pricing. Don’t set your price against the competition, set your price against substitutes and alternatives.

• There is a great quote on the Blue Ocean Strategy website: Stop benchmarking the competition. The more you benchmark your competitors, the more you tend to look like them.

Create a brand new cost-value ratio

• Blue Ocean is not a differentiation strategy. Your goal is not to say to customers: We can give you the same thing at a lower cost. Nor is it to say: Our product costs more but it is such high quality, it’s worth it.

• This is an area where you really have to dig around and come up with something new.

• The product or app market is the perfect testing ground for Blue Ocean because the value of the product or apps has really not been set.

• For the most part, you probably don’t know yet what people will pay or what a new service is worth to your business.

Create a brand new cost-value ratio

• Makes planning hard? No, it is not.

• It frees you up entirely to consider a whole new way of looking at cost-value ratio. Rather than reacting to the market place (what will the market pay for this?), you get to reconstruct the market boundaries.

• The Blue Ocean Strategy takes you through six principles that show you how to do this.

• We need to realign our thinking when it comes to cost to include the three main propositions of: People, profit and value.

A Clue to Success

• And here’s a clue to the success of your Blue Ocean Strategy.

• If people in the Red Ocean scoff at your idea – pay attention, you’re probably onto something.

• They get so focused on protecting their waters and fighting competitors they have trouble seeing out to anything new and innovative.

• If they can’t see what you’re thinking, chances are the market hasn’t seen it yet either and they will be ready to arrive.

Dynamic

• One important advice: If your Blue Ocean Strategy is never going to become a Red Ocean, it’s probably either a Blue Ocean in a puddle or you’re a government sanctioned monopoly.

• Any company that makes the mistake of thinking one Blue Ocean strategic move will provide them with lasting sustainability will one day be irrelevant as have many behemoths of the past.

Dynamic

• Look at Blackberry for example, who rested too long in the glory of their original Blue Ocean smartphone.

• Their makers, Research in Motion (RIM) is now struggling to play catch up to Apple, Google and Samsung.

• Their next release - Blackberry Q10 needs to take place soon (to ensure it’s not drowned out by an anticipated iphone5) and it needs to create great leaps in leaps in value or it will be relegated to the transfer station for irrelevant products.

To Summarise

• The Blue Ocean Strategy is not a once-off strategic move but rather a suite of principles and strategic tools that should be adopted into the corporate culture of your organisation.

• The release of a Blue Ocean product or service may not happen regularly but for an organisation to remain at the head of its game, Blue Ocean strategic thinking must be embedded across the business from product development, finance, operations and marketing.