Identify and target non-customers to create new market opportunities.
Can be used for: Market Analysis
The Three Tiers of Non-Customers is a strategic tool developed by W. Chan Kim and Renée Mauborgne in their Blue Ocean Strategy framework. It categorizes non-customers into three tiers: soon-to-be non-customers, refusing non-customers, and unexplored non-customers. Soon-to-be non-customers are dissatisfied customers who may leave for a better offering. Refusing non-customers are those who actively choose competitors over your offering. Unexplored non-customers are individuals or organizations whose needs are not met by any existing offerings. By understanding and targeting these non-customers, companies can uncover new market opportunities and create uncontested market space.
Type of tool: Market Positioning
Expected outcomes:
Identify dissatisfied customers at risk of leaving for better offerings
Target customers actively choosing competitors over your offering
Discover individuals or organizations with unmet needs in the market
Uncover new market opportunities by understanding non-customers
Create uncontested market space by addressing the needs of non-customers
In detail
The Three Tiers of Non-Customers is a strategic tool developed by W. Chan Kim and Renée Mauborgne as part of their Blue Ocean Strategy framework. This tool provides a unique perspective on market segmentation by categorizing non-customers into three distinct tiers: soon-to-be non-customers, refusing non-customers, and unexplored non-customers.
The first tier, soon-to-be non-customers, consists of dissatisfied customers who are at risk of leaving for a better offering. These individuals or organizations may be experiencing pain points or unmet needs with their current providers, making them ripe for the picking by competitors who can offer a more compelling value proposition. By identifying and understanding the needs and preferences of soon-to-be non-customers, companies can proactively address these issues and prevent customer churn.
The second tier, refusing non-customers, comprises individuals or organizations who actively choose competitors over your offering. These non-customers have made a conscious decision to opt for alternatives in the market, indicating a clear preference for what competitors are providing. Understanding the reasons behind their choices can provide valuable insights into areas where your offering may be falling short or where competitors are excelling. By analyzing the preferences and behaviors of refusing non-customers, companies can identify opportunities to differentiate themselves and win back market share.
The third tier, unexplored non-customers, represents individuals or organizations whose needs are not currently being met by any existing offerings in the market. These non-customers may be operating in underserved or overlooked segments, presenting untapped potential for companies to expand their market reach. By identifying unexplored non-customers and conducting in-depth research into their unique requirements, companies can uncover new market opportunities and create uncontested market space.
Overall, the Three Tiers of Non-Customers tool aims to help companies rethink their approach to market segmentation and customer targeting. By focusing on non-customers who are dissatisfied, refusing, or unexplored, businesses can gain a deeper understanding of the competitive landscape, identify areas for innovation and differentiation, and ultimately create uncontested market space. This strategic tool encourages companies to look beyond their existing customer base and explore new avenues for growth and success in an increasingly competitive business environment.
How to use it
Identify your current customer base and categorize them into three tiers: soon-to-be non-customers, refusing non-customers, and unexplored non-customers.
For soon-to-be non-customers, gather feedback and data to understand their dissatisfaction and reasons they may leave for a better offering.
For refusing non-customers, research and analyze why they actively choose competitors over your offering. Identify key factors influencing their decision.
For unexplored non-customers, conduct market research to identify individuals or organizations whose needs are not met by any existing offerings.
Develop targeted strategies to address the needs and preferences of each tier of non-customers. This may involve product/service improvements, marketing campaigns, or new product development.
Implement your strategies to attract and convert non-customers into customers. Monitor the effectiveness of your initiatives and adjust as needed.
Track the impact of targeting non-customers on your business performance. Measure metrics such as customer acquisition, market share growth, and revenue increase.
Continuously review and update your Three Tiers of Non-Customers analysis to stay ahead of changing market dynamics and evolving customer needs.
Pros and Cons
Pros
Cons
Identifying new market opportunities
Expanding customer base beyond current market segments
Reducing competition by creating uncontested market space
Increasing market share and revenue potential
Enhancing customer satisfaction and loyalty
Driving innovation and differentiation in products or services
Improving overall business performance and profitability
Gaining first-mover advantage in untapped markets
Building a sustainable competitive advantage
Fostering long-term growth and sustainability
Overlooking existing loyal customers who may feel neglected or unappreciated when companies focus too much on targeting non-customers.
Difficulty in accurately identifying and categorizing non-customers, leading to potential misallocation of resources and efforts.
Risk of alienating current customers by shifting focus towards attracting non-customers, potentially damaging brand loyalty.
Limited success in converting non-customers into actual customers, as they may have strong preferences or loyalty towards competitors.
Potential for increased competition as other companies may also target the same non-customers, leading to a crowded market space.
Inability to sustain long-term growth if the strategy solely relies on targeting non-customers without considering overall market dynamics.
Lack of clear metrics or benchmarks to measure the effectiveness of targeting non-customers, making it challenging to evaluate the success of the strategy.
Possibility of neglecting core competencies and strengths of the company in pursuit of attracting non-customers, leading to a loss of competitive advantage.
Risk of spreading resources too thin across different customer segments, resulting in diluted efforts and suboptimal outcomes.
Difficulty in maintaining a balance between catering to existing customers and targeting non-customers, potentially causing internal conflicts and strategic misalignment within the organization.
When to Use
Businesses evolve from a simple idea into complex entities that undergo various stages of growth, learning, and adaptation before ultimately reinventing themselves to remain competitive. Throughout these stages, leveraging the right tools can significantly enhance success and efficiency. Below are the typical stages highlighting the stages where this tool will be useful. Click on any business stage to see other tools to include in that stage.
