Profipoly – 1
A business must aim to become a profipoly – building a “profits monopoly” which sucks the oxygen of profits from the competition limiting their capacity to grow or even survive. It is the most powerful competitive advantage a business can create for itself. A “profipoly strategy” can be thought of as a set of choices to winning and continuing Power in significant markets.
I wrote in ProfitXL to Profipoly: Solving the Four Funnel Frictions: “Historically, we’ve seen several non-government profipolies. More than a century ago, Standard Oil reigned in the US, until it was dismantled by government intervention. In the 1960s and 70s, IBM ruled computing. AT&T in the US was the profipolist in telecom until it was broken up by US regulators. Many others persisted until technological advancements or strategic blunders diminished their dominance. Microsoft and Intel, colloquially known as Wintel, held a commanding position in the computing industry throughout the 1980s and 1990s, and reportedly garnered 110% of industry profits, implying a 10% loss for all others! Nokia, with its 40% market share in mobile phones, was another profipoly, which was eventually surpassed by Apple. In the adtech space, Google and Facebook have forged a profitable duopoly, leaving scant room for others. Visa and Mastercard reign payments processing, Amazon rules ecommerce and reinvests its cash flows for increasing market share. LVMH has created a house of luxury brands, allowing it to seize a large portion of the market’s profits, mirroring the concept of a “profipoly.” De Beers maintains its stranglehold on diamond trade. In India, Indigo Airlines, with a striking 60% market share, has continued to grow by continuously investing in expanding routes, causing several competitors to capitulate.”
What will it take for a digital/eCommerce business to build a profipoly? In fact, the challenge most digital businesses (especially in eCommerce) face is that they are not very profitable – a far cry from being profipolies. So, what is the strategy that can take a business from being profitless (no profits or less profits) to becoming a profipoly?
I wrote in Profipoly: Marketing’s Fourth Wave and Final Frontier: “Profipoly marketing isn’t a departure from the previous waves but rather a synthesis and evolution. The foundational branding efforts ensure that businesses establish trust and identity, while performance marketing builds on this by identifying and acquiring the most suitable audience. Once acquired, martech ensures they stay loyal. Profipoly takes this a step further by emphasising not just loyalty, but profitability. Instead of casting wide nets or even targeted nets, profipoly marketing aims to maximise revenue from the most valuable customer segments and their networks… A profipoly-driven brand will not expend resources equally on all customers but will invest disproportionately in keeping its highest value customers engaged and satisfied. This doesn’t mean alienating other customers, but rather optimising resources for maximum profit generation. Moreover, the line between loyalty programs and customer experience will blur. Brands will offer unique, hyper-personalised experiences to their top-tier customers, making them not just loyal followers but ardent brand advocates.”
