# Three Tiers of Non-Customers

Blue oceans are built on new demand, not on stealing market share from competitors. The largest untapped opportunity for any business lies in the people who are NOT its customers. W. Chan Kim and Renee Mauborgne identified three tiers of non-customers, each representing a different distance from your current market. Understanding and converting these non-customers is how blue oceans generate explosive growth.


## Table of Contents
1. [Why Non-Customers Matter More Than Customers](#why-non-customers-matter-more-than-customers)
2. [The Three Tiers](#the-three-tiers)
3. [Non-Customer Analysis Worksheet](#non-customer-analysis-worksheet)
4. [Interview Guides for Each Tier](#interview-guides-for-each-tier)
5. [Case Studies of Non-Customer Conversion](#case-studies-of-non-customer-conversion)
6. [From Non-Customers to Market Sizing](#from-non-customers-to-market-sizing)
7. [Non-Customer Conversion Checklist](#non-customer-conversion-checklist)
8. [Common Mistakes in Non-Customer Analysis](#common-mistakes-in-non-customer-analysis)

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## Why Non-Customers Matter More Than Customers

Most companies obsess over existing customers: satisfaction scores, retention rates, share of wallet. This focus is important for operational excellence, but it is the wrong starting point for strategic innovation.

**The math of non-customers:**

| Metric | Typical Industry |
|--------|-----------------|
| Your market share | 5-30% of existing market |
| Existing market | 10-40% of potential market |
| Your actual reach | 0.5-12% of potential demand |
| Non-customers available | 88-99.5% of potential demand |

The ocean of non-customers is almost always larger than the pool of existing customers. Even a small conversion rate from non-customers can dwarf the gains from winning competitors' customers.

## The Three Tiers

### Tier 1: "Soon-to-Be" Non-Customers

**Who they are:** People sitting on the edge of your market. They use your industry's offerings minimally, out of necessity, while actively searching for something better. They are mentally one foot out the door.

**Characteristics:**
- They use the industry's product/service, but reluctantly
- They are the first to leave when an alternative appears
- Their usage is minimal: lowest tier, least frequent, smallest purchase
- They often express dissatisfaction but continue because they see no alternative
- They show declining engagement over time

**How to spot them:**
- Customers on the cheapest plan who never upgrade
- Buyers who purchase only when absolutely necessary
- Users with declining usage patterns
- Customers who complain but stay (for now)
- People who use your product for a narrow subset of its capability

**Real-World Example: Pret A Manger**

Tier 1 non-customers of fast food were busy professionals who ate at fast food chains reluctantly because they needed speed but wanted healthier, fresher options. They were "soon-to-be" non-customers of fast food, ready to leave the moment a better option appeared. Pret offered fresh, premium-quality food at fast-food speed, converting these reluctant fast-food buyers into loyal customers of a new category.

**Real-World Example: Spotify**

Tier 1 non-customers of music purchasing were people who bought one or two songs per month on iTunes but found per-song pricing frustrating. They wanted more music but did not want to pay $0.99-1.29 per track. Spotify's unlimited streaming subscription converted these minimal purchasers into heavy consumers.

### Tier 2: "Refusing" Non-Customers

**Who they are:** People who have consciously evaluated your industry's offerings and rejected them. They are aware of what you offer but have decided it is not for them. They either use an alternative from a different industry or go without.

**Characteristics:**
- They have considered your industry and said "no"
- They can articulate specific reasons for their refusal
- They may have tried the industry once and not returned
- They use workarounds or alternatives from other industries
- They see the industry's offerings as unacceptable, unaffordable, or irrelevant

**How to spot them:**
- People who tried your product/industry once and never came back
- People who use clearly inferior alternatives for reasons they can explain
- People who say "I looked into it, but..."
- People who use manual/DIY solutions instead of the industry's offerings
- Former customers who left and never returned

**Real-World Example: JCDecaux**

Cities were Tier 2 non-customers of outdoor advertising. Municipal governments had evaluated billboard-style advertising and rejected it: too ugly, too commercial, too costly to maintain. JCDecaux created a blue ocean by offering free, beautifully designed bus shelters with integrated advertising panels. Cities got free street furniture and maintenance. JCDecaux got premium advertising space. The "refusing" non-customers became enthusiastic partners.

**Real-World Example: Robinhood**

Tier 2 non-customers of stock brokerage were young people who knew about investing but refused because of high commissions ($7-10 per trade), complex platforms, and account minimums. Robinhood eliminated commissions, removed minimums, and created a mobile-first, simple interface. Millions of people who had refused brokerage services became active traders.

### Tier 3: "Unexplored" Non-Customers

**Who they are:** People in markets distant from yours who have never considered your industry's offerings as an option. They are the furthest from your current market, and the industry has never targeted or thought about them.

**Characteristics:**
- They have never considered your industry as a possible solution
- They may not even know your industry exists in the form it takes
- Their needs are being met (or not met) by something completely different
- The industry has assumed these people are "not our market"
- They represent the largest potential pool but require the biggest strategic shift to reach

**How to spot them:**
- Demographic groups the industry has never targeted
- Geographic markets the industry has never entered
- Use cases the industry has never considered
- People solving the underlying need in a completely different way
- People who do not solve the underlying need at all (non-consumption)

**Real-World Example: Callaway Big Bertha**

The golf equipment industry was entirely focused on serious golfers who played regularly. Tier 3 non-customers were occasional golfers and complete beginners who found traditional clubs difficult to use. Callaway's Big Bertha driver had an oversized head that made it much easier to hit the ball, converting people who had never considered buying premium golf equipment into buyers.

**Real-World Example: Nintendo Wii**

Tier 3 non-customers of gaming consoles were families, seniors, and non-gamers who had never considered buying a game console. The industry had always assumed these people were simply "not gamers." Nintendo's motion-controlled Wii attracted tens of millions of people who had never owned a console, creating an entirely new market segment.

## Non-Customer Analysis Worksheet

Use this worksheet to systematically analyze non-customers for your business.

### Section 1: Identify Non-Customers by Tier

**Tier 1: Soon-to-Be Non-Customers**

| Question | Your Answer |
|----------|-------------|
| Who uses our product/industry reluctantly? | |
| Who is on the cheapest plan or buys the minimum? | |
| Who shows declining engagement? | |
| What are their stated frustrations? | |
| What would make them leave? | |
| Estimated size of this tier | |

**Tier 2: Refusing Non-Customers**

| Question | Your Answer |
|----------|-------------|
| Who has evaluated our industry and said no? | |
| What reasons do they give for refusing? | |
| What alternatives or workarounds do they use instead? | |
| What would have to change for them to reconsider? | |
| Who tried our industry once and did not return? | |
| Estimated size of this tier | |

**Tier 3: Unexplored Non-Customers**

| Question | Your Answer |
|----------|-------------|
| Who has the underlying need but has never considered our industry? | |
| What demographic groups does our industry ignore? | |
| Who solves this need in a completely different way? | |
| Who does not solve this need at all (non-consumption)? | |
| What assumptions does our industry hold about "who our market is"? | |
| Estimated size of this tier | |

### Section 2: Find Commonalities Across Tiers

The most powerful blue ocean insights come from finding common threads across all three tiers.

| Commonality Theme | Tier 1 Evidence | Tier 2 Evidence | Tier 3 Evidence |
|-------------------|-----------------|-----------------|-----------------|
| Too expensive | | | |
| Too complex | | | |
| Too time-consuming | | | |
| Too intimidating | | | |
| Wrong format/channel | | | |
| Missing key feature | | | |
| Other: _________ | | | |

**The strongest blue ocean opportunities address barriers that appear across all three tiers.** If Tier 1 customers find the product too complex, Tier 2 refused because it was too complex, and Tier 3 never considered it because the category seems complex, then radical simplification is likely the path to a blue ocean.

## Interview Guides for Each Tier

### Tier 1 Interview Guide (Current Minimal Users)

**Recruitment:** Identify customers with the lowest usage, cheapest plans, or declining engagement.

**Duration:** 30-45 minutes

**Questions:**

1. How often do you use [product/service]? Has that changed over time?
2. What do you use it for? What do you NOT use it for?
3. When you use it, what frustrates you most?
4. If you could change three things about it, what would they be?
5. What alternatives have you considered or tried?
6. What would make you use it more often?
7. What would make you stop using it entirely?
8. If this product/service did not exist, what would you do instead?
9. How does using this make you feel? (frustrated, satisfied, indifferent?)
10. What do you wish existed that does not?

**Listen for:** Specific friction points, declining emotional investment, awareness of alternatives, conditional loyalty ("I stay because...").

### Tier 2 Interview Guide (Conscious Refusers)

**Recruitment:** Find people through surveys, social media, or referrals who have evaluated your industry and chosen not to participate.

**Duration:** 30-45 minutes

**Questions:**

1. Tell me about the time you considered [industry/product]. What prompted you to look into it?
2. What did you find when you evaluated it?
3. What specifically made you decide not to go ahead?
4. What are you doing instead to meet that need?
5. How well does your current alternative work? What is its biggest limitation?
6. What would the [industry/product] need to offer for you to reconsider?
7. What is the single biggest barrier to your participation?
8. If someone designed the perfect solution for your needs, what would it look like?
9. What do people in your situation generally do about this need?
10. Is there anything about [industry] that you find unnecessary or off-putting?

**Listen for:** Specific rejection reasons, the gap between what the industry offers and what this person needs, emotional barriers (intimidation, distrust), practical barriers (cost, time, access).

### Tier 3 Interview Guide (Unexplored Non-Customers)

**Recruitment:** This is the hardest group to find. Look for people in adjacent markets, different demographics, or different geographies.

**Duration:** 20-30 minutes (shorter because they have less context)

**Questions:**

1. When you need to [job-to-be-done], what do you do?
2. Have you ever heard of [industry/product]? What do you know about it?
3. Why have you never considered using [industry/product]?
4. What would have to be true for you to consider it?
5. What is the biggest challenge you face with [underlying need]?
6. How do you currently solve that challenge?
7. If I told you there was a [product/service] that could [key benefit], would that interest you? What questions would you have?
8. What is the most you would be willing to pay/spend for a solution to [need]?
9. Where would you expect to find or buy such a solution?
10. What would make you tell your friends about a solution like this?

**Listen for:** Complete lack of awareness (or misconceptions) about the industry, the underlying need they do have, what form factor or channel would reach them, price sensitivity relative to the alternatives they currently use.

## Case Studies of Non-Customer Conversion

### Case Study: Curves (Fitness)

| Tier | Non-Customer Group | Barrier | How Curves Addressed It |
|------|-------------------|---------|------------------------|
| 1 | Women with gym memberships who rarely went | Intimidating environment, time commitment | Women-only, 30-minute circuit, no mirrors |
| 2 | Women who tried gyms and quit | Too complex, too expensive, too intimidating | Simplified machines, low cost, supportive community |
| 3 | Women who never considered a gym | Believed gyms "are not for people like me" | Neighborhood locations, non-gym atmosphere, word-of-mouth from friends |

**Commonality across tiers:** All three groups shared a feeling that traditional gyms were not designed for them. Curves built its entire offering around this shared barrier.

### Case Study: Uber (Transportation)

| Tier | Non-Customer Group | Barrier | How Uber Addressed It |
|------|-------------------|---------|----------------------|
| 1 | Occasional taxi users who found cabs frustrating | Unpredictable wait, cash-only, no accountability | Real-time tracking, cashless, ratings |
| 2 | People who refused taxis due to cost or availability | Too expensive for regular use, unavailable outside city centers | Surge pricing transparency, UberX pricing below taxis, wider coverage |
| 3 | People in areas with no taxi service at all | No taxis exist in their area | Enabled drivers in any area with a car to provide service |

**Commonality across tiers:** Lack of reliability and transparency. All three groups wanted to know: How long will it take? How much will it cost? Will the experience be acceptable?

## From Non-Customers to Market Sizing

Understanding non-customers transforms market sizing from a "TAM/SAM/SOM" spreadsheet exercise into a strategic tool.

### Traditional Market Sizing (Red Ocean Thinking)

```
Total Addressable Market (TAM): All people currently buying in the industry
Serviceable Addressable Market (SAM): The segment you can reach
Serviceable Obtainable Market (SOM): The share you can realistically win
```

This approach only counts existing customers and divides them among existing competitors. It is zero-sum.

### Blue Ocean Market Sizing

```
Current Market: Existing industry customers
Tier 1 Expansion: Soon-to-be non-customers convertible with small changes
Tier 2 Expansion: Refusing non-customers convertible with barrier removal
Tier 3 Expansion: Unexplored non-customers convertible with reframing
Blue Ocean TAM = Current Market + Tier 1 + Tier 2 + Tier 3
```

### Market Sizing Template

| Segment | Estimated Size | Conversion Requirements | Revenue Potential |
|---------|---------------|------------------------|-------------------|
| Current market customers | | Already buying | |
| Tier 1: Soon-to-be non-customers | | Small offering adjustments | |
| Tier 2: Refusing non-customers | | Barrier removal, ERRC changes | |
| Tier 3: Unexplored non-customers | | Category reframing | |
| **Blue Ocean TAM** | | | |

### Sizing Tips

- Tier 1 is usually 1-3x the size of your current customer base
- Tier 2 is often 3-10x the size of the current market
- Tier 3 can be 10-100x the size of the current market (but hardest to convert)
- Start with Tier 1 for quick wins, then expand to Tier 2 and Tier 3
- Use non-customer interviews to validate size estimates

## Non-Customer Conversion Checklist

Before finalizing your blue ocean strategy, verify:

- [ ] You have identified and sized all three tiers of non-customers
- [ ] You have conducted interviews with at least 5 people per tier
- [ ] You have found commonalities across tiers (shared barriers)
- [ ] Your ERRC grid directly addresses the top non-customer barriers
- [ ] Your strategy canvas divergent curve would appeal to non-customers
- [ ] Your pricing is accessible to the mass of non-customers (not just Tier 1)
- [ ] You have estimated the market expansion potential from each tier
- [ ] Your go-to-market strategy reaches non-customers (not just existing channels)
- [ ] You have identified which tier to target first for fastest validation
- [ ] Your value proposition can be explained in terms non-customers understand (no industry jargon)

## Common Mistakes in Non-Customer Analysis

### Mistake 1: Treating Non-Customers as Monolithic

The three tiers have fundamentally different barriers and different conversion requirements. A strategy that converts Tier 1 may do nothing for Tier 3. Analyze each tier separately before looking for commonalities.

### Mistake 2: Asking Existing Customers About Non-Customers

Your current customers cannot tell you why non-customers refuse your industry. You must talk directly to non-customers. Current customers have a survivorship bias that blinds them to the barriers others face.

### Mistake 3: Assuming Non-Customers Cannot Afford Your Product

Cost is sometimes the barrier, but often it is not. Many Tier 2 non-customers have the money but find the offering irrelevant, intimidating, or inconvenient. Do not default to "make it cheaper" without understanding the real barrier.

### Mistake 4: Focusing Only on Tier 1

Tier 1 is the easiest to reach but the smallest expansion. The biggest blue oceans come from Tier 2 and Tier 3 conversion. Do not stop at the edge of your current market.

### Mistake 5: Ignoring Non-Consumption

The most powerful form of Tier 3 non-customers are people who simply do not address the need at all. They are not using an alternative. They are living without a solution. This "non-consumption" represents pure new demand.
