Marketing: Disrupted and Simplified (Part 20)

Profipoly

If we were told to design the ideal business with no resource constraints, what would we do?

The goal would be to maximise industry profits, thus leaving no surpluses (“oxygen”) for competition to invest and grow. As we have seen, not all customers are profitable if acquisition and servicing costs are factored in. So, the first task would be to identify the sector’s most profitable customers and acquire them.

Once acquired, the next objective would be to ensure to keep them forever and get 100% of their spend in that category. This would necessarily mean providing them with the best possible experiences (“velvet rope marketing”) and perhaps combined with a loyalty program that keeps the goodies coming as they keep spending. Airlines do this amazingly well with their loyalty programs. The “loyalty lock-in” ensures that travellers want to stick to the same airline, accumulate miles, move up the tiers, and get rewarded with better experiences. The perfect business would do the same – design experiences to ensure customers never churn and maximise their spend with the business.

The next stage would be to turn customers into advocates – thus dramatically reducing acquisition costs for the Next (Best) customers. Best customers are likely to know other potential Best customers in their friends and family network. Incentivising them to get more like them can create a continuous supply of new customers with similar characteristics in terms of spending and profitability. Once a new customer is acquired, the business then has to accelerate that customer’s journey to profitability by enabling them to follow in the footsteps of the Best customers – this is where the Best Customer Genome comes in by suggesting what products or services to recommend at each stage of the customer journey.

If all of this can be made into a repeatable process, the flywheel kicks in – and that’s the secret to super-normal growth and profits. It is what the best businesses do. Look at Amazon and Costco and you will see this growth flywheel at work. Amazon Prime and Costco’s Membership program are the cornerstones of building businesses that suck out the oxygen of growth from competition and create a “profits monopoly” (profipoly).

As I wrote previously in Best Customers and Velvet Rope Marketing: “By building a double moat of getting the industry’s Best Customers and then maximising revenues from them, it becomes possible to create a profits monopoly (profipoly) which can cut off the oxygen that competition needs to grow.”

This brings us to the next set of questions: How does one create such a business? How can the marketer help in designing such a business? What impact will all the recent privacy-linked changes by Google and Apple have on the design? Is marketing really that simple? If so, why isn’t everyone doing it this way? How can marketers get started on this journey?

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Rajesh Jain

An Entrepreneur based in Mumbai, India.

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