Slide 1: Blue Ocean Strategy: Reaching Beyond Existing Demand part B Andrew Shipilov
Slide 2: FWG Strengthens its Segmentation Brands
Low Involvement Easy Going Glass with friends Least care choosing a wine Not wine preferrers Price is a strong influencer Enjoyers Everyday enjoyment To relax/unwind Stick with limited list of known brands Choose in-store Not interested in wine language Influenced by major brand advertising Lindemans M/F: 50/50 Age: 35-49 Aspirationals Image important Wine preferrers (sic) Varietal knowledge Interested in some wine language Enjoy trying new wines Appreciators Want to discover wine Knowledge of wine regions Frequently buy >$10 wines Join wine clubs Don’t stick to known brands High Involvement Connoisseurs Sophisticated drinker Discerning wine tastes Don’t decide in store Have a cellar Less influenced by specials/ promotions Actively pursue wine knowledge Penfolds Age: 40+
Ideal wine is Visit wineries / complex & read wine articles interesting Rosemount Estate M/F: 30/70; Age: 30-40 Wolf Blass M/F: 70/30; Age: 35-50
Brand: Demographic:
Slide 3: Video Case Part B
We looked at the industry from a structuralist (supply) point of view What if we looked at the industry from a reconstructionist (demand) point of view?
• Market boundaries are not viewed as given, but could be reconstructed to unlock new demand
Slide 4: What are you looking for in a wine?
Slide 5: Industry Profile/ Strategic Groups
High
Low
Slide 6: Low
High
[yellow tail]
Pr ic e
Di Wi Te stinc ne rm tio ino ns log / Ab y ov Ma e th rke e l tin ine g Ag ing Qu ali ty Vin Pr eya es rd tig e
Non-Customers
Co Win mp e lex it y W ine Ra ng e
Slide 7: ERRC Grid
Eliminate
Reduce
Raise
Create
Slide 8: Three Tiers of Non-Customers
First tier: buyers who purchase your industry offerings out of necessity and will jump ship as soon as the opportunity presents itself Second tier: buyers who purchase alternative offerings that serve the same function Third tier: people who don’t consume even the alternatives to your offerings
sample volume Core wine Drinkers Marginal Wine drinkers Beer/spirits drinkers Non drinkers Total 10% 86%
15% 33% 42% 100%
14% 0% 0% 100%
Slide 9: 3 Core Principles
Reconstruct Market Boundaries … overcome believes. Reach beyond existing Demand … go for Non-Customers.
COST
Get the strategic sequence right … value [innovation] first.
VI VALUE
Slide 10: Unlocking non-customer demand:
Value Innovation Utility
Create new buyer utilities
Price
Set a price that attracts a mass of buyers
Cost
Set the structure based on a target
Slide 11: Value Innovation of [yellow tail]
Utility proposition
(customers, distributors and retailers)
Creating of a social drink that is accessible to anyone Easy drinking, ease of selection, sense of fun and adventure Limit number of SKUs Price to move at volume
Price proposition
Targeted at the mass of customers Priced against the alternative (6-pack)
Cost structure
Elimination of working capital tied up in aging wines Fast product turnover
Slide 12: Generic Strategies vs. Value Innovation
Red Ocean Strategy
High
Blue Ocean (VI) Strategy
High
V1 Quality
•
D
V1 Quality
•
Low High Cost
LC
Low C1 Low High Cost C1 Low
Structuralist
Reconstructionist
Slide 13: Key Takeaways (1)
Three tiers of non-customers:
• 1: buyers who purchase your industry offerings out of necessity; will jump ship if given an opportunity. • 2: buyers who purchase alternative offerings that serve the same function • 3: people who don’t consume even the alternatives to your offerings
Non-customer demand is unlocked by providing new buyer utilities, at a price that attracts a mass of buyers, given target costs.
Buyers could be not only end-users, but also other participants in a value chain (e.g. distributors)
Slide 14: Key Takeaways (2): Comparison of approaches
Red Ocean Strategy Blue Ocean Strategy
thank you