Marketing Services: Moving from the Red Ocean to the Blue Ocean

At GRAPH EXPO, print service providers are being exposed to the world of new media like never before. As the 2010 theme states clearly, this is the “Next Generation of Print.” The question is, how do print providers use this new generation to their advantage?

In 2005, W. Chan Kim and Renée Mauborgne published a book entitled “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.” It considers how technology and globalization are making it increasingly difficult for businesses to compete. It explains that cost cutting strategies can only take a business so far, and explores why managers must implement a series of actions to open up new market spaces.

Are you red or blue?

Kim and Mauborgne divide the market into two types of oceans: red and blue. In the red ocean, companies attempt to outperform their rivals to obtain market share. Products become commodities, and competition turns the ocean bloody.

The blue ocean consists of firms that have identified new products and services in uncontested market space. Within the industry, the blue ocean is represented by savvy marketing service providers. These businesses have sought untapped market spaces. For these entrepreneurs, the competition is irrelevant because the rules of the game have been reset.

Even for companies that are currently swimming in the blue ocean, a key message is that the underlying technologies already exist. The idea is not to create new technologies, but to differentiate oneself by linking existing technologies to the things that buyers value. Becoming a blue ocean firm doesn’t mean venturing into distant waters—it means exploring adjacent markets to leverage core competencies.

One of the principles in building a blue ocean strategy is reconstructing market boundaries. You must seek blue oceans in areas where the competition is not looking. Print providers must start viewing their competitors differently. The true competitor isn’t the printer down the street, but the latest media technology. Boundaries must extend beyond print into true multi-channel communications that are linked to changes in consumer media consumption habits.

According to Internet World Stats, global Internet penetration surpassed 25% in 2009. In addition, the media options aren’t just online—they include print, social, and mobile communications too. As of July 2010, Facebook reported having more than 500 million active users that were spending 700 billion minutes a month connecting with friends. YouTube views currently exceed two billion every day. And then there are mobile communications. Almost every activity that we partake in during a typical day—even eating and sleeping—is conducted while our cell phones are within reach. According to data from wireless association CTIA, 86% of U.S. adults currently own a cell phone. Of the 265 million mobile phones currently in use in the U.S., more than 240 million are text enabled. During 2009, almost five billion text messages were sent daily.

Marketers are seeking partners that will help them reach today’s unreachable consumers and communicate across multiple channels by engaging technologies. To move away from the red ocean of bloody competition, savvy service providers are reconstructing their boundaries and providing cross-media service portfolios. Let’s look at some examples.

VistaPrint

VistaPrint has demonstrated the ultimate blue ocean strategy. While other printers were fighting it out in the red ocean of print procurement in corporate America, VistaPrint aggregated volume and made professional print and multi-channel marketing services affordable for micro, small, and medium-sized businesses. The company offered Internet capabilities that had previously not been available for a reasonable cost. The results speak for themselves. In its July 28, 2010 earnings release, VistaPrint reported revenues of $670.0 million, marking a 30% increase over revenues of $515.8 million during fiscal year 2009. Gross margin for the full fiscal year was 64.2%, compared to 62.8% in fiscal 2009. Furthermore, the company’s services portfolio is continually expanding to meet the needs of small and medium-sized businesses. VistaPrint provides a full range of capabilities, including design services, e-mail marketing, simple Web design tools, and the ability to track and monitor results.