After perusing the article “Blue Ocean Strategy”, I realized that I had employed this strategy five years ago when I was in my sophomore year. A friend, who coincidentally just joined the CMU Australia campus and I decided to do something productive with our time and earn a little money while we were at it.
It was the year when almost every individual in their prime age was bitten by the entrepreneurial bug. Everyone wanted to start their own tech firm, printing company or travel agency, but we didn’t want to drown in this red ocean. We did not want to lose our way in today’s overcrowded market, with rivals competing over narrow margins and revenue strategies. We wanted to develop something that could take advantage of other’s nascent position in the market and offer it at an affordable price, a “blue ocean”. And we knew that this strategy can be achieved only when the whole system of a company’s utility, price and cost activities are properly aligned.
Our brainchild, called Go Social, dealt with advertising companies who are trying to create their position in the market by providing social media marketing strategies. This provided us with the differentiating factor that everyone was looking for. In India, the social media marketing space was relatively new and unexplored. There weren’t any competitors in the market for new clients. All of the existing social media advertisers were involved in the advertising of established firms since it roped in more revenue. And, the other firms were targeted by traditional advertising agencies.
Traditional advertising costs for thousand impressions vary from $5 for billboards to $55 for direct mails. On the flipside, Go Social charged less than $2 for a thousand impressions on Facebook. But the value that we added to our clients was ten folds that of traditional advertising firms. We provided a bridge between our clients and its customers. The direct feedback mechanism from customer posts/comments helped companies increase their value by improving their products and thereby gaining a larger customer base.
By driving down costs while simultaneously driving up value, we achieved a leap in value for both ourselves and our clients. Over a period of time, as we captured more of the un- or under-served market, our costs decreased because of the experience curve. We knew exactly the kind of social media viewers to target that would convert into viable customers for our clients. It helped narrow our target demographics and the number of people we had to reach, thereby reducing costs. I find it easy to understand how a new venture can afford to take the plunge into the blue oceans, but what about existing companies? How do they gauge if starting a new subsidiary in an unknown industry will prove profitable and not damage their existing reputation in the bloody red ocean?