Do we prioritize blue ocean marketing over red ocean marketing?
QUESTION: We liked the blue ocean versus the red ocean business model you wrote about last Friday. We attended the blue ocean strategy seminar that Josiah Go’s Mansmith and Fielders offered some five or six years ago. You took care of the research side of the seminar. We still use what we learned then.
Our biggest learning was what you said in last Friday’s column. The two models are two market realities and we do business in both. Blue ocean marketing is creating a business by serving the unserved and underserved segments. Red ocean marketing is growing the business by continuing to serve and satisfy the served market better than competition. If we wish to be in both markets, we have to master both models.
We’re in the ready-to-wear apparel business, doing well over the past 12 years. There were more good times than bad. During bad years, it’s the red ocean marketing that saved us. During good years, blue ocean marketing grew our business. Is this a good rule for us to follow?
Answer: Your rule of thumb for prioritizing between the two business models is good. After all, it has served you over 12 long years. But as in the case with other rules, it can’t be right all the time and in all situations. So avoid locking yourself in this one rule. Be open to changes. Make two or three other options and learn when and where each option applies.
You also have to challenge your diagnosis. How do you know that your rule was the right conclusion and prescription to draw from what happened over the past 12 years? In those years when you saw the red ocean model as responsible for saving your business, was there no other plausible business model to account for what happened? Ask yourself a similar question for those years when you concluded it was the blue ocean model that grew your business.
Let’s now go to your specific business—ready-to-wear apparel. According to your business rule, if this year, 2016, is going to be a difficult year, then you must pay more attention to your existing served market and differentiate your apparel from competition. It’s an election year, so this looks like the priority rule to apply.
What about after the May elections? Suppose, for example, Vice President Jejomar Binay wins? Last December, a group of European investors went on record to say that if this happens, most of them will leave with their money. The consequent change in the investment climate may trigger a return to hard times. So, in the second half of this year, your rule tells you to shift to blue ocean marketing.
In addition to the changing political-economic conditions, it’s just as critical to consider your product’s sales cycle. How long does an apparel innovation sales last? If it’s according to the four seasons of the year, then plan for a quarterly change over the year.
However, there are businesses that have an even shorter sales cycle. Look, for example, at donuts. A new and good donut variant sells well on its first two weeks, reaches a peak in the next week or two, and then declines in week 5 and 6. To obtain continuous revenue growth, the market reality requires that new donut variants must be offered. So you have to commit to continuously innovating. Does this mean then, following your business rule, that you alternate between blue ocean and red ocean marketing every four to six weeks?
Here’s another market reality to consider. Growing your ready-to-wear apparel business means you’re into continuous innovation, which is most likely of the next-generation type. It also means you’re into retaining your existing and current customers. You’re therefore serving the unserved, the underserved and the served market segments all at the same time. You’re in both blue ocean and red ocean marketing.
But even if you’re in both segments, you have to set priorities for both your budget and time. Since your apparel lines and market segments are many and with differing sales cycles, you have to set your priorities according to revenue productivity, growth, and profitability. Attend to the apparel lines and/or the market segment with the larger sales volume and greater profit growth.
If you’re under a product management setup, you prioritize by apparel lines. If you’re into a market management organization, priority setting will be by market segments of the unserved, the underserved and the served. These are your new customers, lapsed customers and retained customers.
Finally, is there a business that lasts long in the unserved segment of non-user and new customers so that the priority belongs to blue ocean marketing for that long period of time? Yes, there are such businesses. They are defined by how slow competitors are able to equal the innovating business. The longer it takes competition to effectively imitate, the longer blue ocean marketing stays.
But successful imitation is a function of customer behavior. That’s about how reluctant the unserved new customers are in accepting imitations. The more hesitant customers are, the longer the blue ocean innovator will stay as the market leader.
In the ultimate analysis, it’s all about uncovering—for the blue ocean innovator on what will drive a non-user to become a user, and for the red ocean imitator on what will drive the converted user to accept the imitation. Learn the underlying customer behavior model at work and you’ll learn where and how to apply any business model and innovation.
Keep your questions coming. Send them to me at [email protected].
