Blue Ocean Strategy And Digital Marketing

Blue Ocean Strategy And Digital Marketing

A number of well recognised brands have disappeared over the last few years such as Blockbuster, Woolworths, Compaq, Republic and Jessops – all recognised brands who at one stage were market leaders. So what’s the common thread of these well-established traditional retailers not managing to re-invent themselves as a digital brand?

• ‘Dont find customers for your products, find products for your customers; putting the customer at the centre of the conversation by interacting, engaging and using their feedback to steer new opportunities to satisfy and delight users (e.g. Threadless, Apple, 37Signals). The removal of the ‘us v them’ mentality and building one to one communication with their customers through the use of social media.

• Digital disruption – Start-ups who were prepared to take on the big brands and re-invent traditional markets by eliminating running costs, reducing value chains and doing with out bureaucratic systems and red tape that hinder large corporations in reacting to a new competitor – here’s a great video of a small start-up re-writing the rules for bicycle industry

Moving traditional companies to embrace the digital age requires a cultural shift within an organisation and what your brand stands for to a digital audience. Where brand loyalty was once a successful ingredient towards brand survival, this has been replaced by an impatient digital audience expecting to be delighted by brands that create remarkable products and services and they frankly don’t care if the brand is well establised or not.

So how can brands re-position their proposition in a digital world? What differentiates their product or service? And are they listening to their audience?

Blue Ocean Strategy

To review opportunities for differentiation, brands need to consider embracing the Blue Ocean strategy which is defined as creating an untapped market place. Created by W. Chan. Kim and Renee Mauborgne, Blue Ocean Strategy suggests an organisation should look to create a new demand in an uncontested market space. The opposite to the Blue Ocean is the Red Ocean, which is where the existing competition is fighting it out for market share with one another as explained below.

 

By creating an uncontested market space, a Blue Ocean provides you with the opportunity to create a new demand for your product or service from an untapped customer base and at the same time delight your existing customers.

Starbucks strategy 

To put this into context, here are two brands that have successfully introduced this strategy, Starbucks and Threadless.

Starbucks – The largest coffee house in the world, was operating in a highly competitive market place and needed to re-define its proposition to its consumer base.

By turning the idea of having a cup of coffee into a ‘way of life’ by redefining how customers can enjoy a Starbucks experience through the coffee shop environment, introducing music and wi-fi in a relaxed setting the company established a new market space which other coffee chains ignored (or are now trying to replicate).

Below is a value curve which helps to create an uncontested market place (blue ocean). The curve lists the common factors competitors all compete on (ranking these from low to high importance):

 

Traditionally, the key factors coffee chains compete on are: price, quality, availability & location of the stores. Starbucks saw the opportunity to create new factors that none of its competitors were doing which were:

• Variety - It’s not just about coffee, Starbucks have introduced a number of different products and drinks that cater for a wider audience which can be enjoyed in a social setting where customers can read, relax and socialise
• Customer Service – Starbucks focused on recruiting employees that were well trained and benefited directly from the organisations success thereby delighting customers
• Brand Aspiration - Accelerated Starbucks to become a global brand that created an aspirational brand which customers wanted to experience and became a “day-out” experience in meeting friends.

As you can see, variety, customer service and Brand aspiration were not factors considered by the competition, hence providing Starbucks with a route to differentiation and regard these factors as highly valued to the organisation.