CHAPTER 13 David Taylor’s Brand Stretch Spectrum
LEARNING OBJECTIVES
After examining this chapter, readers will have the ability to:
■ Understand the importance of evaluating newly developed healthcare products in an effort
to determine whether they will carry existing brand names or be assigned new ones.
■ Realize the tradeoffs associated with the use of brand extensions in the healthcare
marketplace.
■ Appreciate the value of David Taylor’s Brand Stretch Spectrum as a tool for formulating a
variety of brand extension pathways.
INTRODUCTION
On an ongoing basis, healthcare marketers forward intensive efforts to develop the brands they
are responsible for managing. Such concentrated attention to brand management responsibilities is to
be expected because of the many benefits that successful brands afford to healthcare entities. Most
notably, brands establish product identity, allowing customers to easily locate the goods and services of
given organizations and differentiate them from competitive offerings. When healthcare marketers
develop successful brands, they deliver valuable institutional assets that, if well managed, will yield
enduring benefits for their associated healthcare organizations.
Brand management initiatives are called upon for a variety of reasons, one of which is new
product development. When new products are developed, healthcare marketers encounter numerous,
related branding issues, with one of the most notable being the determination of whether new goods
and services will carry existing brand names, termed brand extensions, or be assigned entirely new ones.
Whether to field brand extensions or introduce new brands requires careful consideration.
Brand extensions carry the benefit of familiarity in that target audiences already possess an awareness
of associated brand names. This certainly affords advantages for new offerings in that the burden of
building a base identity is significantly reduced and might even be outright eliminated depending on the
strength of established brand names.
Despite this powerful benefit, brand extensions are not always desirable. Brand portfolios can
occasionally be overextended with too many products carrying given badges, resulting in confusion for
both healthcare marketers and their customer populations. New product offerings also might not
logically fit under existing brand names, warranting that such offerings carry newly developed identities.
Significantly, brand extensions carry risks associated with the application of successful brand
names to new and unproven product offerings. If these new products are not successful, such offerings
will likely diminish the overall value of the brand names that they carry, negatively impacting all of the
other product offerings in given brand portfolios. Regardless, the extension of established brand names
to newly developed product offerings represents a practice worthy of consideration any time new goods
and services present themselves.
Interestingly, in the course of managing brands, healthcare marketers may discover logical
additions to existing product arrays, resulting in various brand extensions. Hence, brand extensions can
spur new product development even in the absence of formal initiatives to do so.
For assistance whenever brand extensions are under consideration, healthcare marketers can
turn to the Brand Stretch Spectrum, a tool developed by David Taylor. Illustrated in Figure 13-1, Taylor’s
Brand Stretch Spectrum identifies three paths for extending, or stretching, existing brands: the core
range extension, the direct stretch extension, and the indirect stretch extension. Each of these paths
presents opportunities for growth and expansion under the right circumstances, with risk increasing as
extensions move further away from core product offerings. These three brand extension pathways,
accompanied by examples in Figures 13-2 and 13-3, are explained as follows.
FIGURE 13-1 Taylor’s Brand Stretch Spectrum
Adapted from Brand Stretch: Why 1 in 2 Extensions Fail and How to Beat the Odds by David
Taylor. Copyright © 2004 by John Wiley & Sons Limited. Reproduced with permission.
FIGURE 13-2 A Pharmaceutical Firm’s Brand Stretch Spectrum
Constructed using design methodologies in Taylor, David. Brand Stretch: Why 1 in 2 Extensions
Fail and How to Beat the Odds. Chichester, West Sussex, UK: Wiley, 2004.
FIGURE 13-3 A Medical Clinic’s Brand Stretch Spectrum
Constructed using design methodologies in Taylor, David. Brand Stretch: Why 1 in 2 Extensions
Fail and How to Beat the Odds. Chichester, West Sussex, UK: Wiley, 2004.
THE CORE RANGE EXTENSION
The core range extension represents the application of a brand name to a new version (i.e., a
product form variant) of an existing branded product. Because the brand is applied to a product with
common core characteristics, such extensions are quite logical and reasonably safe pursuits.
An extra-strength version of a branded aspirin product offered by a pharmaceutical
manufacturer, for example, would represent a core range extension. So, too, would a newly established
weekend medical clinic that carried the brand name of an existing weekday clinic. Yet another core
range extension would be that of a deluxe wheelchair line offered by a durable medical equipment
company that was placed under the same brand name as an existing wheelchair line possessing a
standard array of features.
Core range extensions are essentially equivalent product offerings, distinguished only by
moderate feature and benefit differences. With such products, brand extensions make perfect sense
because the given offerings are so closely related to each other. This affords excellent opportunities for
newly developed goods and services to benefit from existing brand awareness in the marketplace.
THE DIRECT STRETCH EXTENSION
The direct stretch extension involves the application of an existing brand name to a broadened
array of goods and services that differs from the core offering upon which the extension was based. This
extension essentially stretches the brand name to cover items within a particular product class, which
extends beyond the specific product form from which the brand name was derived.
A pharmaceutical manufacturer that introduces cold and flu, allergy, and cough remedies under
an existing brand associated with its array of aspirin products has effected a direct stretch extension. A
medical clinic offering primary care services would, too, effect a direct stretch extension by placing a
new specialty care clinic under its existing brand name. Likewise, a durable medical equipment company
that introduces a new line of walkers, canes, and crutches under the brand name of its successful array
of wheelchairs effects a direct stretch extension.
Although direct stretch extensions differ from the core offerings that provided their associated
brand identities, these extensions do fit into like product classes. Regardless, direct stretch extensions
carry a greater degree of risk than core range extensions because the associated product offerings are
different. This necessitates that healthcare marketers carefully evaluate direct stretch initiatives to
ensure that these extensions represent appropriate applications for existing brand names.
THE INDIRECT STRETCH EXTENSION
The indirect stretch extension involves entry into a new product class. The degree of
differentiation between the existing product class and the newly pursued one can range from mild to
substantial. Because indirect stretch extensions branch out into unrelated product classes, they stretch
brand names across a wide array of diverse product offerings, essentially creating umbrella brands.
A pharmaceutical manufacturer exclusively focused on the pain relief product class would effect
an indirect stretch extension by introducing a vitamin product under the brand name carried by its pain
relief products. A medical clinic focused on the provision of comprehensive medical services in
outpatient settings would effect an indirect stretch extension if the establishment decided to construct
and operate a hospital or nursing home. A durable medical equipment company providing a
comprehensive array of personal mobility products would effect an indirect stretch extension by
introducing a new line of hospital beds under the brand name associated with its array of personal
mobility products.
Indirect stretch extensions pierce through the current product classes pursued by healthcare
entities, placing them in new product classes containing goods and services that may be closely
associated with, or very distant from, the goods and services offered in existing product classes. Clearly,
indirect stretch extensions carry the highest level of risk associated with stretching brand names
because established identities are being applied to product classes that are new and different. Given
this, healthcare marketers must ensure that a goodness of fit exists between new product classes and
existing brand identities because weak connections might possibly diminish existing brand equity.
OPERATIONAL MATTERS
Taylor’s Brand Stretch Spectrum clearly identifies three potential paths for extending brand
names to cover products that are increasingly distant from the core offerings upon which the associated
brand names originated. Each of these extensions can be successfully effected under the right
circumstances.
As with any new product pursuit, extensions should carefully be evaluated to ensure that
markets for given products exist and that the application of existing brand names to new offerings
makes sense to both internal and external audiences. If these conditions are met, the brand extension
route affords many opportunities for marketing success. If, however, new goods and services appear to
possess great potential, but existing brand names do not seem to represent appropriate identities for
these new offerings, the establishment of entirely new brand identities would likely yield better
marketing results.
Significantly, Taylor’s Brand Stretch Spectrum can be used to spark new product ideas. By
understanding the various pathways for stretching brands, healthcare marketers can review their
existing product arrays and ask themselves how they might go about effecting core range, direct, and
indirect stretch extensions. This activity can yield very productive new product insights even if formal
systems for new product development do not exist. It is not uncommon for some of the best new
product ideas to grow out of existing product offerings and, when this happens, the application of
existing brand names to these new goods and services offers excellent opportunities to quickly connect
with target audiences.
SUMMARY
David Taylor’s Brand Stretch Spectrum provides healthcare marketers with a useful portrayal of
potential paths for effecting brand extensions. Aside from its use as a tool for understanding such
extensions, Taylor’s Brand Stretch Spectrum can be used to foster new product development initiatives
by encouraging healthcare marketers to envision how they might potentially extend their product arrays
beyond core offerings.
EXERCISES
1. Define and comprehensively discuss David Taylor’s Brand Stretch Spectrum, providing
insights into its guidance and use as a device for the extension of core brands. Preface your discussion
by reflecting on the advantages and disadvantages associated with brand extensions. How would you
characterize the prevalence of brand extensions in the healthcare industry? What is the basis of your
characterization?
2. Select a healthcare good or service of your choice and assign the product an appropriate
brand name. Using David Taylor’s Brand Stretch Spectrum, envision potential brand extensions to this
hypothetical healthcare offering by formulating core range extensions, direct stretch extensions, and
indirect stretch extensions. Provide an illustration of your Brand Stretch Spectrum and offer a narrative
explaining your rationale for assembling the brand portfolio as you did.
REFERENCE
Taylor, David. 2004. Brand stretch: Why 1 in 2 extensions fail and how to beat the odds.
Chichester, West Sussex, UK: Wiley.
CHAPTER 14 The Market-Product Grid
LEARNING OBJECTIVES
After examining this chapter, readers will have the ability to:
■ Understand the three-step process of target marketing and its importance in the healthcare
industry.
■ Realize the benefits afforded to healthcare entities as a result of target marketing practices.
■ Understand major segmentation variables upon which markets can be divided.
■ Recognize the value of the Market-Product Grid as an instrument for segmenting markets and
targeting appropriate segments.
INTRODUCTION
In an effort to more effectively address the wants and needs of customers, marketers engage in target
marketing, a practice that involves three interrelated activities: market segmentation, targeting, and
product positioning. Market segmentation is the process of dividing a market into groups (i.e.,
segments) of individuals who share common characteristics. When the market has been segmented,
marketers engage in targeting where they select (i.e., target) attractive segments and focus their efforts
on satisfying the wants and needs of these groups. These targeted segments are known as an entity’s
target market. Product positioning follows targeting and involves the determination of an appropriate
and effective image for products to convey to customers.
Target marketing developed out of desires to more appropriately address the various wants and needs
of different customer groups. The practice stands in contrast to mass marketing, which involves offering
products to the market as a whole without regard for individual tastes and preferences.
Target marketing makes sense. Women of childbearing age, for example, have potential needs for labor
and delivery services. Parents have needs, courtesy of their infants and young children, for pediatric
medical services. Elderly individuals have needs for home health care, assisted living, and nursing home
services.
By focusing on the specific wants and needs of market segments, marketers can deliver goods and
services that are specifically tailored for the associated groups. This practice not only improves customer
satisfaction but also allows for better use of promotions resources through the selection of
communications vehicles that precisely reach desired populations.
A useful tool for target marketing is known as the Market-Product Grid, an instrument that specifically
addresses the segmenting and targeting aspects of the practice. Illustrated in Figure 14-1, the MarketProduct Grid, as depicted by Roger Kerin, Eric Berkowitz, Steven Hartley, and William Rudelius, consists
of a matrix with markets identified on its vertical axis and products identified on its horizontal axis. The
actual number of cells in the matrix is, of course, dependent on the number of markets and products
identified. As a result, Market-Product Grids range from being quite small for entities with few markets
and few products to being very large for entities that offer multiple markets an extensive array of
products.
To create a Market-Product Grid, marketers simply (1) construct a matrix of sufficient size, (2) list
potential markets on the vertical axis, (3) list product offerings on the horizontal axis, and (4) evaluate
each of the resulting market-product combinations, characterizing them as large, medium, small, or
nonexistent markets.
The activity of listing the goods and services of entities on the Market-Product Grid is quite simple, but
identifying and listing potential markets can be somewhat challenging without some point of reference.
This point of reference can often be found by consulting a breakdown of segmentation variables, such as
the one listed in Table 14-1.
This table provides examples of specific segments that exist within each of the four major segmentation
categories: geographic, demographic, psychographic, and behavioral. It, however, presents only a few of
the almost endless market segments that marketers could potentially pursue. Such a table serves as a
useful starting point for identifying markets for placement on the Market-Product Grid.
FIGURE 14-1 The Market-Product Grid
Adapted from Marketing, 7th ed. by Roger A. Kerin, Eric N. Berkowitz, Steven W. Hartley, and William
Rudelius. Copyright © 2003, 2000, 1997, 1994, 1992, 1989, 1986 by The McGraw-Hill Companies, Inc.
Published by McGraw-Hill. Reproduced with permission of The McGraw-Hill Companies.
Table 14-1 Major Segmentation Variables
From Kotler, Philip; Armstrong, Gary, Principles of Marketing, 10th Edition, © 2004, Pg. 240. Reprinted
by permission of Pearson Education, Inc., Upper Saddle River, NJ.
OPERATIONAL MATTERS
Figure 14-2 illustrates a Market-Product Grid that was developed for a home health agency. Here, the
agency used the grid to assess the market potential of different areas of Jackson County. The grid
indicates that the south and central sections of Jackson County possess large markets, the east section
possesses a medium market, and the north and west sections contain small markets. The grid clearly
identifies the most prominent markets (i.e., the south and central regions) for home health services
within the county—information that can greatly assist the agency in determining which markets it
wishes to pursue.
FIGURE 14-2 A Home Health Agency’s Market-Product Grid
Constructed using design methodologies in Kerin, Roger A., Eric N. Berkowitz, Steven W. Hartley, and
William Rudelius. Marketing. 7th ed. New York: McGraw-Hill, 2003.
Figure 14-3 presents a more complex Market-Product Grid that was developed for a sports medicine
clinic. Here, the clinic sought to examine Washington County’s market potential for various sports
medicine procedures by type of sport. The grid notably reveals a prominent market across all sports for
foot and ankle procedures, followed closely by knee procedures. It also reveals that, among sports
types, the tennis and golf sports populations possess the largest markets for broad sports medicine
procedures—details that shed significant light on segment opportunities.
FIGURE 14-3 A Sports Medicine Clinic’s Market-Product Grid
Constructed using design methodologies in Kerin, Roger A., Eric N. Berkowitz, Steven W. Hartley, and
William Rudelius. Marketing. 7th ed. New York: McGraw-Hill, 2003.
It should be noted that although the largest markets might seem to represent the most productive
marketing pursuits, such markets are not always appropriate targets. Organizations must, for example,
factor in marketplace competitors, their dominance in certain segments, and their overall numbers.
Certain segments, although large, may be saturated with competitors or dominated by market leaders.
In such situations, smaller markets with fewer competitors may be more desirable segments to pursue.
Aside from competitive elements, healthcare organizations might select smaller markets based on the
particular missions they embrace. Entities that cater to underserved , rural populations represent
excellent examples of institutions engaging in this practice.
It should also be noted that Market-Product Grids are only as accurate as the information that is used to
complete them. Although they remain useful even with informally collected data, the use of data
derived from formal market research can greatly improve their accuracy.
SUMMARY
The Market-Product Grid provides a simple, yet highly useful, method for segmenting and targeting
markets. By using this tool, marketers can more precisely identify and target appropriate customer
groups. The Market-Product Grid also ensures that marketers consider multiple market opportunities.
EXERCISES
1. Define and comprehensively discuss the Market-Product Grid and its role as an instrument for
segmenting markets and targeting appropriate segments. Preface your discussion by sharing insights
regarding the value of target marketing in the healthcare industry.
2. Visit the Web site of an area healthcare institution and identify as many of its product offerings as
possible. Based on your knowledge of your local region, identify potential markets for these products.
With this information, construct a Market-Product Grid for the given healthcare entity, being sure to
evaluate the resulting market-product combinations. Then, prepare a narrative describing the most
appropriate targets based on your analysis. Are the targets you selected consistent with the perceived
selections of the given health-care entity? Explain your rationale.
REFERENCES
Kerin, Roger A., Eric N. Berkowitz, Steven W. Hartley, and William Rudelius. 2003. Marketing. 7th ed.
New York: McGraw-Hill.
Kotler, Philip, and Gary Armstrong. 2004. Principles of marketing. 10th ed. Upper Saddle River, NJ:
Prentice Hall.
CHAPTER 15 Kotler & Trias de Bes’ Lateral Marketing Strategy
LEARNING OBJECTIVES
After examining this chapter, readers will have the ability to:
■ Appreciate the value of target marketing as an important healthcare marketing activity.
■ Understand the practice of vertical segmentation, the traditional approach to market segmentation,
which involves identifying viable segments by drilling down into markets.
■ Understand the practice of lateral segmentation, a nontraditional approach to market
segmentation, which encourages marketers to look broadly at markets to identify previously overlooked
opportunities.
■ Appreciate the value of Kotler and Trias de Bes’ Lateral Marketing Strategy as an instrument, when
used in tandem with traditional approaches, for realizing the true depth and breadth of marketplace
opportunities.
INTRODUCTION
Target marketing—the three interrelated activities of market segmentation, targeting, and product
positioning—represents one of the most important marketing practices. This practice essentially tailors
products for specific market segments in an effort to encourage exchange. Clearly more productive than
mass marketing, which involves marketing goods and services to broad markets without regard for
individual tastes and preferences, target marketing places a defined emphasis on serving specific
customer populations and represents a very common marketing practice.
Despite the obvious benefits that the practice of target marketing affords to marketers and their
customers, there are refinements that can be effected to improve the practice. One area of
improvement concerns the first step of target marketing—market segmentation.
Specifically, market segmentation is the process of dividing a market into groups (i.e., segments) of
individuals who share common characteristics. Market segmentation is typically effected by drilling
down into markets, bypassing layers that are deemed undesirable until desirable layers of associated
markets have been identified. Appealing market segments are then targeted. This very common, drilldown orientation of market segmentation can be termed vertical segmentation.
Vertical segmentation is clearly a viable method for segmenting markets, but as illustrated in Figure 151, the practice of drilling down into markets results in many missed opportunities. Such opportunities,
although historically passed up, will become all the more important as the competitive intensity of the
marketplace continues to increase and vertically defined segments become increasingly saturated.
To assist marketers in improving their segmentation results by identifying missed opportunities, Philip
Kotler and Fernando Trias de Bes formulated Lateral Marketing Strategy, a method for introducing
lateral segmentation into the array of segmentation tools already possessed by marketers.
Kotler and Trias de Bes developed Lateral Marketing Strategy to encourage marketers to look broadly at
their markets in an attempt to identify opportunities to serve customer groups that have previously
been overlooked, courtesy of the drill-down orientation of vertical marketing. The technique benefits
marketers through the identification of valuable segments to pursue. Significantly, it also benefits
customers whose wants and needs might otherwise go unnoticed.
FIGURE 15-1 Vertical Segmentation & Missed Opportunities
From Lateral Marketing: New Techniques for Finding Breakthrough Ideas by Philip Kotler and Fernando
Trias de Bes. Copyright © 2003 by Philip Kotler and Fernando Trias de Bes. Reprinted with permission of
John Wiley & Sons, Inc.
THE LATERAL MARKETING STRATEGY APPROACH
Lateral Marketing Strategy essentially requires that healthcare marketers carefully examine their served
market segments and the products that are used to address those segments. Specifically, healthcare
marketers must endeavor to determine what market segment opportunities, if any, have been
overlooked or bypassed over the course of serving current customer populations. Previously forgone
segments are then evaluated to determine whether they are worthy of pursuit, with valuable segments
becoming potential target markets.
Consider an assisted living facility that has, as part of its product array, constructed a wellness center to
serve its elderly population. The wellness center clearly provides benefits for its target market—the
elderly residents of the facility—but in drilling down to this target population, what potential
opportunities were overlooked? Depending on the capacity of the wellness center, opportunities for it
to also serve as a fitness center for members of the community might be possible. The array of wellness
center equipment, coupled with the skills of current employees, might also provide opportunities for the
establishment of a physical therapy clinic.
Each of these options—true departures from vertical segmentation initiatives—can potentially improve
the revenues earned by the assisted living facility, illustrating the benefits offered by Lateral Marketing
Strategy. As this example demonstrates, lateral segmentation initiatives require a degree of exploration
and creativity on the part of healthcare marketers, but they afford a range of segmentation
opportunities that might otherwise be neglected.
Importantly, Kotler and Trias de Bes note that lateral segmentation is not a substitute for vertical
segmentation. Instead, it is a complementary technique that increases the potential for the
identification of productive market segments. When vertical and lateral segmentation approaches are
combined, healthcare marketers significantly increase the range of growth opportunities at their
disposal—an important benefit given the ever-increasing competitive intensity of the healthcare
marketplace.
SUMMARY
Kotler and Trias de Bes’ Lateral Marketing Strategy provides healthcare marketers with an innovative
method for broadly viewing segment opportunities in the marketplace. By adding lateral segmentation
to their existing array of segmentation tools, healthcare marketers better position themselves and their
organizations for enduring marketing success.
EXERCISES
1. Define and discuss the vertical segmentation and lateral segmentation techniques and provide
details regarding their respective deployment in the healthcare industry. Do you view Kotler and Trias
de Bes’ Lateral Marketing Strategy as a technique that will compel healthcare marketing managers to
reevaluate their segmentation practices? Explain your rationale.
2. Reflect on the various healthcare organizations in your local community and their respective
targets. Can you identify any attractive opportunities that were possibly overlooked? If so, what are
they?
REFERENCE
Kotler, Philip, and Fernando Trias de Bes. 2003. Lateral marketing: New techniques for finding
breakthrough ideas. Hoboken, NJ: Wiley.
CHAPTER 16 Kim & Mauborgne’s Blue Ocean Strategy
LEARNING OBJECTIVES
After examining this chapter, readers will have the ability to:
■ Understand the increasingly saturated state of the healthcare marketplace, necessitating innovative
efforts to locate target markets.
■ Realize the value of looking to both established and developing markets for market share growth
opportunities.
■ Appreciate the value of Kim and Mauborgne’s Blue Ocean Strategy as a tool for guiding target
marketing innovations.
INTRODUCTION
Healthcare marketers routinely endeavor to segment given markets, target desirable customer
populations, and position their products in a manner that will be attractive to designated customer
groups. These three interrelated activities—market segmentation, targeting, and product positioning—
combine to form the essential and increasingly important practice known as target marketing.
Now more than ever, to be successful at target marketing, healthcare marketers must be open-minded.
This open-mindedness is required because the healthcare marketplace is becoming increasingly
saturated with competitors, necessitating that healthcare marketers become innovative in their efforts
to locate viable target audiences. One approach that can assist healthcare marketers in broadening their
perspectives of the marketplace is known as Blue Ocean Strategy, a method for viewing markets that
was developed by W. Chan Kim and Renee Mauborgne.
Blue Ocean Strategy encourages marketers to view their markets differently than they have in the past.
This new approach stands in contrast to Red Ocean Strategy, the traditional approach to viewing
markets, as illustrated in Figure 16-1. Specifically, Blue and Red Ocean Strategies are distinguished from
each other by their different philosophies pertaining to five important attributes: market space,
competition, demand, the value-cost tradeoff, and differentiation/low cost parameters. These attributes
are explained as follows.
MARKET SPACE
Whereas Red Ocean Strategy focuses on competing in ever-saturated markets, Blue Ocean Strategy
seeks to identify new markets for given product offerings. Blue Ocean Strategy is so termed as a
reference to open, clear blue water in the ocean—a stark contrast to the bloody, red ocean water
resulting from attacks of some sort—making it a useful analogy for uncontested market space.
FIGURE 16-1 Red Ocean Strategy vs. Blue Ocean Strategy
Reprinted by permission of Harvard Business School Press. From Blue Ocean Strategy: How to Create
Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renee
Mauborgne. Boston, MA 2005, p. 18. Copyright © 2005 by the Harvard Business School Publishing
Corporation; all rights reserved.
Smaller markets that have traditionally been overlooked in pursuit of larger ones represent potential
blue oceans for healthcare entities. The same would be true of rare, but highly desirable, value-added
practices like house calls offered by physicians or home delivery offered by retail pharmacies. As these
examples illustrate, the discovery of blue oceans requires imagination, but when identified they afford
uncontested market space ready to be acquired by innovative entities.
COMPETITION
Whereas Red Ocean Strategy seeks to battle competition within known markets, Blue Ocean Strategy
seeks to pursue uncontested markets, thus avoiding direct competition. Successful market share
pursuits into previously untapped markets, however, will likely draw competitors, which may ultimately
turn blue oceans into red oceans. Therefore, healthcare marketers must ensure that they maintain the
ability to compete in red oceans, regardless of the current fortunes offered by blue oceans.
DEMAND
Whereas Red Ocean Strategy exploits existing demand by engaging in market share battles within
known markets, Blue Ocean Strategy involves the pursuit and capture of new demand by opening up
new, previously untapped markets. In many established marketplaces, supply exceeds demand, creating
the bloodiest of red oceans as competitors struggle for market share in an effort to remain viable. Such
pressures do not exist in blue oceans, where potentially substantial, although untapped, demand may,
in fact, exist.
THE VALUE-COST TRADEOFF
It has traditionally been accepted that products offering greater value carry higher costs, and vice
versa—the domain of Red Ocean Strategy. Blue Ocean Strategy, instead, seeks to break the value-cost
tradeoff by increasing value while reducing costs. This practice, termed value innovation, is
accomplished by embedding enhanced customer-desired features into product offerings, while
simultaneously reducing or eliminating elements that are not important to customers. Value innovation
essentially provides customers with more for less.
If a retail pharmacy, for example, discovered that its customers favored low cost prescription drugs and
quick service over any other shopping concern, the given retailer could concentrate on reducing
nonessential elements of the shopping experience. The resulting savings could then be used to offer the
lowest priced prescription drugs and bolster expeditious service. Hence, greater value would be
afforded to customers at reduced costs.
DIFFERENTIATION/LOW COST PARAMETERS
Closely related to the value-cost tradeoff issue is the differentiation/low cost matter. Whereas Red
Ocean Strategy seeks to pursue either differentiation or low cost, Blue Ocean Strategy seeks to
simultaneously pursue differentiation and low cost. A retail pharmacy, for example, seeking to offer the
lowest priced prescription pharmaceuticals could provide home delivery for a modest fee, preserving
low cost initiatives, while simultaneously offering a differentiated service.
OPERATIONAL MATTERS
Perhaps the most obvious aspect of practice related to Blue Ocean Strategy is that pursuit of such
uncontested market space requires innovative thinking and deep investigation on the part of healthcare
marketers. Identifying blue oceans is challenging but highly rewarding upon discovery of such
opportunities. As markets become increasingly saturated with competitors, the viability of healthcare
entities rests with the discovery of new opportunities for growth. Blue Ocean Strategy represents an
approach for identifying and pursuing pathways to growth and prosperity.
SUMMARY
Blue Ocean Strategy serves to remind healthcare marketers that they must look beyond the traditional
boundaries of established markets for opportunities to achieve growth and prosperity. Certainly,
healthcare marketers must not neglect established markets, as many gains and even marketplace
dominance can be achieved in such markets, but significant attention must also be directed toward the
uncontested market space afforded by blue oceans.
EXERCISES
1. Prepare a detailed essay comparing and contrasting Red Ocean Strategy and Blue Ocean Strategy.
Based on your knowledge of healthcare establishments in your local market, do you perceive the
entities to be competing primarily in red oceans, blue oceans, or both? Please justify your
characterizations.
2. Select a healthcare entity in your local marketplace, choose a product offered by the entity, and
study the associated target markets, characterizing them as either red oceans or blue oceans. What
opportunities remain and are they red oceans or blue oceans? Report your findings in detail.
REFERENCE
Kim, W. Chan, and Renee Mauborgne. 2005. Blue ocean strategy: How to create uncon-tested market
space and make the competition irrelevant. Boston: Harvard Business School Press.
Purchase answer to see full
attachment