How to Target Non-Customers with Blue Ocean Strategy and Design Thinking
In the game of business, the goal is to have a cheaper or better offering than your competitors. Sure, by doing this, you’ll steal customers from your competitors and gain more market share, but what about all the potential customers who aren’t currently in your market? How do you target them?
- To create new demand businesses need to shift from being competitor focussed, to focussing on their non-customers.
- Innovating for your non-customers will allow you to create your own uncontested market space.
Most businesses increase their market share by playing, what is called the game of business. They do this by competing with other players in the industry to be: (a) a cost leader, (b) offer a differentiated product or © target a niche. The business is trapped in the value vs cost trade-off when they do this. In their book, Blue Ocean Strategy, Chan Kim and Renée Mauborgne call this a red ocean, in which the competitors are focussed on being cheaper or better than each other. They are fighting each other for increased market share.
Almost every business these days protests that “We focus on our customers”, “We put our customers first”, or something to that end. What almost every one of these businesses means is that they focus on serving their current customers better — or at least the customers that they are trying to steal from their competitors.
But there is a better way. Blue Ocean Strategy teaches businesses to shift from being competitor focussed, to being customer focussed. Instead of concentrating on what competitors are doing, and how to do it better, focus on what the customers want and how to serve them better; with one key difference.
That key difference is putting your non-customers first. Non-customers are defined as anyone who is not currently a customer of your business or your industry.
What are the Three Tiers of Non-Customers?
All of the people who are not currently customers of an industry can be divided into three tiers. Each tier is increasingly farther away from the customers currently in your market. Tier 1 represents the people that are “soon-to-be” customers. Tier 2 represents the customers who are aware of your offerings but are “refusing” to switch and to your offerings. Tier 3 is the “unexplored” tier; these non-customers are not even aware of your offerings. The number of customers currently in your market is a lot less than the number of non-customers.
Tier 1 — “Soon-to-be”
“Soon-to-be” non-customers are people that are aware of your industries offerings and are on the verge of making the purchase. They may purchase some of an industries offerings out of necessity, but they are mentally not customers of that industry. This “soon-to-be” tier is the smallest tier, closest to the industry and the easiest tier to target.
Tier 2 — “Refusing”
“Refusing” non-customers are people that are aware of your industries offerings but choose not to purchase. They most often buy alternative products to fulfil their needs. People who are “refusing” to join your industry know what it has to offer, but decide against it.
Tier 3 — “Unexplored”
“Unexplored” non-customers are people who are the most distant from your current customer base. They may not even know your industry exists, and they have never considered purchasing your offerings.
Some years ago I needed to catch a Taxi, so I did what everyone else does; I picked up the phone and called the booking number, made a booking and then I waited, and I waited, and I waited some more. Eventually, I called back to see where my Taxi was, only to be told that the driver had picked someone else up while he was on his way to pick me up. So I booked another Taxi, and I waited again, and then I waited even more. Eventually, I decided to walk to the main road and hail a passing taxi. By the time I managed to get to work, I was over an hour late. After this experience, I vowed never to catch a Taxi again.
It doesn’t matter how cheap or how fancy a taxi is, I still refuse to catch one. I am a tier 2 non-customer to any Taxi operator.
What is Design Thinking?
Design Thinking is a mindset and a set of tools that helps to solve complex problems and creatively create something new. At its core, Design Thinking focusses on the human-centred side of problem-solving. Design Thinking is very flexible, with no set-in-stone tasks. There are five, or six, steps, with multiple feedback loops which means the steps will almost certainly not be done linearly. Each step will likely be done a few times.
The first pass through the process you will start working from left to right (in the diagram below), but you may get to the prototype stage and realise that it doesn’t work as it should. From here, you may go back to the define or ideate stage and refine it, then come back to the prototype stage again with a better understanding of the real requirements. It is a trial and error process; eventually, after failing several times, the final product will be much better than the first attempt. But it doesn’t stop there, even after you’ve implemented the product, you can still go back, do the process again and keep refining the product.
Steps in the Process
- Empathise — Design Thinking is human-centred, so it only makes sense that the first step is empathising with the segment for whom you’re innovating. This is done by asking questions such as: For whom are we innovating? What are their problems? What do these people do, think, say, etc.? Usually empathising includes a lot of conversations and surveys, all of this information is then, usually, used to make an empathy map.
- Define — Taking what you learnt from the empathising step and breaking it down will allow you to define the key insights about the customer. What did you learn about the customer? What are the challenges the customer is trying to solve? What are the problems they have in common?
- Ideate — This often looks like a sort of brain-storming workshop coming up with ideas. Finding potential offerings that match with the insights gleaned from the define step.
- Prototype — Break down all of these ideas and pick some simple and testable ideas to prototype. Quickly make a minimum viable product or even just a digital version. Make sure that it ticks all the boxes that you identified in the previous steps.
- Test — Test that prototype with real people that have been selected based on the insights from the empathise step. Get real-time feedback. Chances are this prototype won’t be perfect first try, take this feedback and go back and empathise, define, ideate and prototype again.
- Implement — Finally, you have a market-ready product, or at least a minimum viable product. Take this to market. You will surely get more feedback now that you have more users. Use this feedback, go back and do the process again.
The beauty of Design Thinking is the feedback loops. After each step, you will unlock more information and get a better understanding of the problem you are trying to solve. With this information, go back and update a previous step — redefine the problem, ideate again, and so on.
After a few iterations, you’ll be coming up with new and better ideas that better solve your customer’s problems.
Empathy Mapping for Non-Customers
An empathy map is a tool that teams can use to gain a more in-depth insight into a customer. It is a visual map of the behaviour, influences, preoccupations and environment of a particular customer segment or user persona. Empathy mapping will help to empathise, synthesise and articulate your observations about that persona.
Empathy mapping is a great way, to sum up all of your observations about a persona, by mapping all of the observations you will see what that persona’s common pains, gains, wants and needs are.
A problem that happens all too often is businesses empathy map and innovate for the customers that are already in their market. While this is a great way to serve your current market better, you’ll almost certainly increase your market share by doing this; you won’t increase the size of your market, you won’t create new demand, because you aren’t targeting your non-customers.
You probably see where I’m going with this already, to innovate for your non-customers you need to empathy map for your non-customers as well.
This is what Uber did; they innovated with the non-customers of the Taxi industry in mind. They understood what people who never caught Taxis wants, needs and pain points were. They realised that what non-customers wanted was to remove the hassle of booking a taxi, automate the payment, to know exactly how long until your driver arrives.
Uber is a perfect example of how to apply all of the tools in Blue Ocean Strategy, which I outlined in this article.
The best part is you can do this too, it so easy. The next time you’re trying to understand your market segment or user persona, try using an empathy map but make sure you do an empathy map for each of your tiers of non-customers.