Key takeaways
- Entrepreneurs are always on the lookout for opportunities
- The blue ocean strategy suggests that competing in existing markets is unsustainable
- Customers can have different tiers and can be convinced to use your solution
- Working in a new market requires a different strategy from your existing one
If you are starting a new venture, one of your priorities is to find customers. A business without customers is a concept, not a company. Alternatively, if you are in business and looking for new areas of growth, then you should be looking for customers that don't exist. They come first since you don't have any in that sector or market.
You might be puzzled, but 'puzzlement' has a new perspective. Marketing preaches you should put your customers first, but when you do not have any customers, this gospel is not for the righteous. Instead, it would be best if you use a different lens to uncover value from non-customers. In any case, there will always be more non-customers than customers.
Riches in niches
Many business persons and marketing professionals with an entrepreneurial mindset look for emerging trends and neglected market spaces. These are tiny segments that larger companies ignore, even though they are right under their noses. Red Bull (or its predecessor) was a niche drink in Thailand, and a drink created by Chaleo Yoovidhya influenced Austrian founder Dietrich Mateschitz. It was sold as Krating Daeng (Red Bison). They teamed up and reformulated the beverage to suit Western tastes, achieving a big hit and creating a new segment of drinks. This category is now called energy drinks.
For many years, people would either buy sea moss drinks (a Trinidadian delight) on the streets or make them at home. This drink has its appeal for some people (mostly men) because they feel it might give them more horsepower, but unlike Red Bull, it offers a different kind of energy or feeling. Others do drink it because it is part of our culture (as doubles, bake, and shark). Nestlé did recognise that this niche offered some opportunity in the Trinidad and Jamaican markets and launched Supligen sea moss (flavoured) drink. It's a shame that the niche beverage companies locally allowed Nestlé, with its marketing muscle, to capture this niche. It seems the Red Bull story repeated itself.
The lesson from niches is that while they are small, they offer the potential to grow and become a significant segment. Nestlé made the drink mainstream because it solved two customers' problems: the product's availability and quality. How many of us will buy a street milk drink from an unknown person? Also, Nestlé added healthier benefits to the product, and it is sold as a part of a line (Vanilla, Chocolate, Peanut and Strawberry flavours) and looked to other regional markets for more non-customers.
Levels of non-customers
In their best-selling book titled 'Blue Ocean Shift-Beyond Competing, Proven Steps to inspire confidence and seize new growth.' The authors outlined three levels of non-customers that might be worth pursuing. W. Kim Chan and Renée Mauborgne identify three tiers: first, second, and third. When these non-customers are developed, the market or industry can be expanded, as we saw with Red Bull, or a new category of beverage can be created. They also developed a new strategy called the blue ocean, which suggests that instead of competing against established players, why not avoid them and look for new markets. This approach is an excellent way for a small business to grow its market and for a large firm to bet on a niche that could have some upside.
First-tier customers
These exist in your industry, as they use the product or service occasionally. They are not entirely happy with the current product's solution to their problem, so they still have some pain to resolve. In the case of sea moss sold on the streets, some will buy it but worry about its quality. This perception limits its potential since it has hidden value to be captured for the entrepreneurial company.
First-tier customers could be small and medium-sized enterprises (SMEs) in the insurance market. They buy these products only when the bank asks for coverage of assets in a loan situation or when state regulation requires it. SMEs are significantly underinsured, but strangely, they own the bulk of any country's business wealth (outside of the state).
Second-tier
These customers are refusing customers. These are customers who thought about using the industry's products and services but opted for another industry because it meets their needs better or more cheaply. Most businesses, including SMEs, are family businesses; this is a massive blind spot for marketers and senior executives. They do not know that most of the ultra-wealthy are people who got into that exclusive group because they owned a thriving family enterprise. Think the Ahamads, Lok Jacks, Bhagwansingh’s, etc., of the Trinidad and Tobago business landscape.
Since most SMEs are family-owned and operated, they face a significant challenge that the insurance industry can partly solve. They do not know this, nor does the insurance industry. This perspective is a lateral ignorance of the succession issue, which represents an untapped opportunity.
Third-tier customers
These are unexplored customers who are hiding in the darkness. They frequently belong to the informal economy. I called them phantom customers. They are the phantom that walks! It's common knowledge that a big part of our economy is unaccounted for, and a World Bank study estimated that in Trinidad and Tobago, it could be as high as 30%, which translates to over $50 billion. What is in there is anyone's guess. However, it is more than illegal activities and unethical business transactions.
Starting a business in your home or garage is less risky, and this is where most entrepreneurs start. The industry does not see these home-based micro-businesses as having potential, though. Many house owners may not know that operating a business in their homes might not be covered in their homeowner's policy. These third-tier customers could number in the thousands, and the creation of a micro business policy at a low rate could attract a large following. However, the upside is not in the numbers but in the potential for these micro-entrepreneurs to grow into larger businesses. Entrepreneurs at the early stage will stay with their agent when they mature.
Finally, thinking differently about seemingly small markets could result in releasing a new ocean of opportunities from customers you do not have but could have.
Sajjad Hamid is an Entrepreneurship Educator who supports entrepreneurs in scaling their ventures. In his spare time in Trinidad and Tobago, he attempts to cultivate organic tropical fruits and vegetables, practising sustainable farming in his home garden.
He is the author of Build Your Legacy Business: Solopreneur To Family Business Hero. Sajjad is a Fellow of the Family Firm Institute. You can contact him at [email protected] or visit www.entrepreneurtnt.com.
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