Applying Blue Ocean Strategy to digital marketing

How to create an uncontested market place by repositioning your brand in the digital world

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 Where brand loyalty was once a successful ingredient towards brand survival, this has been replaced by an impatient digital audience expecting to be delighted by brands that create remarkable products and services and they frankly don't care if the brand is well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.

Source - Adapted from Blue Ocean 

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):

Source - Adapted from Blue Ocean Strategy

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.

Threadless Strategy

In the digital landscape, Blue Ocean has a significant part to play in providing brands to re-think their proposition and re-consider their value to the end user. It helps to provide a platform to engage with your customers and to re-appraise where the competition is currently residing (red ocean) and where the opportunity is to create an uncontested market place. A company that's done exactly this in the competitive T-shirt market is Threadless.

Threadless put their customers at the centre of their planning and it's proven to be their USP in creating an uncontested market. If we create a value curve for the T-shirt market, the key factors every organisation competes on are generally: Product Range, Product Size, Price Point, Delivery, Screen Printing and Digital Marketing channels.

Source: Blue Ocean

Competitors have been put into one generic category and are listed in blue. Due to the competitive nature of the sector, price-point for many is where the competition is and is seen as highly important.

Likewise with Starbucks, Threadless saw an opportunity to create new factors in delivering an uncontested market place.

Community

By interacting with their userbase they set about creating an online community which is at the heart of the organisation and at the same time, has resurrected the idea of Brand loyalty through introducing crowdsourcing as a key principle by following some simple principles:

• All T-shirt designs are created by the Threadless online community. Anyone can design a T-shirt and submit for approval. to understand what should go into production, new designs are then put to a public vote where users can vote if they would buy the design or not

• The designer who has their work printed onto T-shirts then receives a cash reward - thereby incentivising the artist with the brand.

• It's a perfect example of the famous phrase: 'Dont find customers for your products, find products for your customers' .

Partnerships

Promoting the value with global organisations to assist in making a difference such as their work with UNICEF

Blue Ocean provides a digital strategy to completely re-define how an organisation is positioned and defined in any market by thinking more laterally and re-appraising how to differentiate the organisation from the competition to open up and create new markets.

Ok, to do this does require a cultural shift, perhaps a change in focus and a willingness to re-appraise how your business interacts with customers (e.g. are they at the centre of your planning and are you listening to them?) Digital is re-writing how business is done, who succeeds and who doesn't and how agile an organisation is in the face of new entrants to a market. It sounds to me by creating an uncontested market place, where your business can define and own seems a logical step to make.

Thanks to Simon for sharing his advice and opinions in this post. Simon is a digital marketer who has led and built commercial marketing strategies for start-ups and large organisations working in entrepreneurial private sector and public sector environments. You can follow Simon on Twitter or read his blog. These views are my personal views and not those of my employer.