THREE TIERS OF NONCUSTOMERS

The three tiers of noncustomers is an analytic framework developed by Chan Kim and Renée Mauborgne to help companies gain insight into the latent demand they can tap into to create blue oceans. Typically, to grow their share of a market, companies strive to retain and expand their existing customer base.

Although the universe of noncustomers typically offers blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them. To convert this huge latent demand into real demand in the form of new customers, companies need to deepen their understanding of the universe of noncustomers.

The first tier of noncustomers is closest to the current market, sitting just on the edge. They are buyers who minimally purchase an industry’s offering out of necessity but are mentally noncustomers of the industry.

The second tier of noncustomers is people who refuse to use an industry’s offering. These are buyers who have seen the current offering as an option to fulfill their needs but have decided against participating.

The third tier of noncustomers is farthest from the market. They are noncustomers who have never considered the market’s offering as an option.

By focusing on key commonalities across these noncustomers and existing customers, companies can understand how to pull them into their new market.

Three Tiers of Noncustomers Example