How to Target Non-Customers with Blue Ocean Strategy and Design Thinking
In the game of business, the objective is to have a cheaper or better offering than your competitors. By doing so, you can steal customers from your competitors and gain more market share. However, how do you target potential customers who are not currently in your market?
Most businesses increase their market share by playing the game of business. They compete with others in the industry to be: (i) a cost leader, (ii) offer a differentiated product, or (iii) target a niche. However, businesses are trapped in the value vs cost trade-off when they do this. In their book, Blue Ocean Strategy, Chan Kim and Renée Mauborgne refer to this as a “red ocean,” in which competitors fight each other for increased market share by being cheaper or better than each other.
Many businesses today claim to “focus on our customers” or “put our customers first,” but what they really mean is they focus on serving their current customers better or the customers they are trying to steal from their competitors.
However, there is a better way. Blue Ocean Strategy teaches businesses to shift from being competitor-focused to being customer-focused. Instead of concentrating on what competitors are doing and how to do it better, businesses should focus on what customers want and how to serve them better, with one key difference: putting non-customers first. Non-customers are anyone who is not currently a customer of your business or industry.
What are the Three Tiers of Non-Customers?
Non-customers of an industry can be divided into three tiers, each further away from the current market. Tier 1 represents people who will soon become customers. Tier 2 represents those who are aware of your offerings but refuse to switch. Tier 3 is unexplored; these non-customers are unaware of your offerings. The number of non-customers is much greater than the number of customers in your market.
Tier 1 — “Soon-to-be”
“Soon-to-be” non-customers are people who are aware of your industry’s offerings and are on the verge of making a purchase. They may have purchased some of the industry’s offerings out of necessity, but they do not consider themselves customers of that industry. This “soon-to-be” tier is the smallest, closest to the industry, and easiest to target.
Tier 2 — “Refusing”
“Refusing” non-customers are people who are aware of your industry’s offerings but choose not to purchase, and they most often buy alternative products to fulfill 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 the most distant from your current customer base. They may not even know your industry exists and 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 waited…and 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 on his way to pick me up. So I booked another taxi, and I waited again…and then 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.
No matter how cheap or fancy a taxi is, I still refuse to catch one, and 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 solve complex problems and create something new in a creative way. At its core, Design Thinking focuses on the human-centered side of problem-solving. The process is very flexible, with no set-in-stone tasks. There are five or six steps with multiple feedback loops, which means that the steps will likely be done differently, and each step may be done a few times.
During the first pass through the process, you start working from left to right (in the diagram below), but you may get to the prototype stage and realize that it doesn’t work as expected. From here, you may go back to the define or ideate stage and refine it, and then return to the prototype stage again with a better understanding of the actual requirements. It is a trial and error process; after several attempts, the final product will be much better than the first attempt. But it doesn’t stop there; even after implementing the product, you can still go back, redo the process, and refine the product further.
Steps in the Process
- Empathize — Design thinking is human-centered, so it only makes sense that the first step is empathizing 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, empathizing includes a lot of conversations and surveys; all of this information is then used to make an empathy map.
- Define — Taking what you learned from the empathizing step and breaking it down will allow you to define the critical 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 brainstorming workshop coming up with ideas. Find potential offerings that match with the insights gleaned from the define step.
- Prototype — Break down all these ideas and pick some simple, testable ideas to prototype. Quickly make a minimum viable product or even just a digital version, and ensure that it ticks all the boxes you identified in the previous steps.
- Test — Test that prototype with real people that have been selected based on the insights from the empathize step. Get real-time feedback. Chances are this prototype won’t be perfect on the first try, so take this feedback and go back and empathize, define, ideate, and prototype again.
- Implement — Finally, you have a market-ready product, or at least a minimum viable product. Take this to the market. You will surely get more feedback now that you have more users. Use this feedback, go back and repeat the process.
The beauty of Design Thinking is the feedback loops. After each step, you will unlock more information and better understand the problem you are trying to solve. With this information, 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 their customers. It provides a visual representation of the behaviour, influences, preoccupations, and environment of a particular customer segment or user persona. By empathy mapping, teams can empathize, synthesize, and articulate their observations about that persona.
Empathy mapping is an effective way to summarize all observations about a persona. By mapping these observations, teams can identify common pains, gains, wants, and needs.
However, a common problem with empathy mapping is that businesses often focus on innovating for their existing customers. While this improves the experience for current customers, it doesn’t create new demand or increase the size of their market. To innovate for non-customers, empathy mapping for non-customers is necessary.
Uber is a great example of a company that innovated with non-customers in mind. They identified the wants, needs, and pain points of people who never used taxis and developed a solution that removed the hassle of booking a taxi, automated payment, and provided precise arrival times.
By applying all of the tools in the Blue Ocean Strategy, Uber was able to create a new market. Check out this article for more information on the Blue Ocean Strategy.
The best part is that you can do this, too. Empathy mapping is easy, and the next time you’re trying to understand your market segment or user persona, try using an empathy map for each tier of non-customers.
