Published December 9-13, 2023
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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.”
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Profipoly – 2
There are two tracks for digital/eCommerce businesses: products which must be compelling for end customers and bring in the revenues, and the marketing spends which generate demand (the attention-interest-desire-action journey). I will focus on marketing because this is where most digital businesses are losing the plot – and therefore the opportunity to create a profipoly.
What marketers are doing is overspending on new acquisitions and underinvesting on existing customers. Half the adtech spending is turning into “AdWaste”. The side effect of this is that there isn’t enough money left for the martech side to build deeper and more rewarding relationships with existing customers. The twin benefits of shifting spends from adtech to martech are a sustainable increase in revenues, and a reduction in wasteful spending which flows to the bottom line. The synergy of an exceptional product offering coupled with a meticulously crafted marketing approach can set the stage for exponential forever profitable growth – the cornerstone of a true profipoly.
So, how can we apply our strategy learnings into crafting a roadmap for building a profipoly?
Strategy is about choices and deciding where to play to win. The first decision CEOs and their CMOs must make is to focus on existing customers rather than new customer acquisition.
This must be followed by deploying new innovations in the martech stack: going from the conventional data, experiences, and communications thinking to focusing on increasing LTV (lifetime value), predicting next best actions, and enabling inbox commerce. [I discuss the 12 innovations that can enable this in Profipoly: Marketing’s Fourth Wave and Final Frontier. Think of this as “invention” – reinventing marketing and converting it from a cost centre into a profits driver.
Because of the over-reliance on new customers for growth, building deep relationships with existing customers is the blue ocean. Customers of a brand do not expect any differentiated experiences and thus have limited loyalty and are easily switched by competitors. What if this could be challenged and changed? What if the frictions in customer journeys could be removed? What if martech could predict the next best actions of every customer? What if martech could deliver hyper-personalisation at scale – marketing to a segment of one?
In the evolving landscape of digital commerce, the realignment of strategy is not just an option but a necessity for businesses aspiring to become profipolies. Success hinges upon deliberate choices and the execution of those choices. A pivot towards valuing existing customers and fostering deeper relationships with them unlocks a vast, often untapped potential. It’s a strategic shift from the saturated battlegrounds of new customer acquisition to the blue oceans of customer loyalty and maximised lifetime value. By integrating cutting-edge martech innovations, businesses can transcend conventional marketing paradigms, creating profit engines with deep moats. It’s a transformative journey where every touchpoint becomes an opportunity, every interaction a step towards hyper-personalisation, and every strategic decision a leap towards building a profipoly. In this realm, strategy doesn’t just shape business choices; it actively moulds the trajectory towards exponential forever profitable growth.
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Netcore – 1
Netcore has a unique opportunity to enable B2C/D2C businesses in their profipoly journey. In doing so, can Netcore become a profipoly?
In my essay 4M and Netcore 2.0: A Framework for Exponential Growth, I had identified Netcore’s strengths:
- World-class ESP (email service provider) platform
- Support for all push channels (email, SMS, push notifications, WhatsApp, RCS)
- Full-stack customer engagement platform
- Unbxd’s strengths in onsite search and recommendations, and AI-based catalog enrichment
- Our India base delivers both a large, cost-effective talent pool and first customers
- A global presence via Netcore International
- Our profitability which has helped us survive and thrive through the years
I had also listed out Netcore’s innovations which can give it continuing power in the martech marketplace:
- AMP in Email, to enable mini-websites and apps inside email (as part of Inbox Commerce)
- Atomic Rewards, to provide micro-incentives for actions delinked from transactions
- Velvet Rope Marketing, which correctly identifies the Best customers based on CLV (customer lifetime value)
- Generative AI, to underpin all that we do
- A synergistic and complementary “Netcore Constellation” via our investments
I had ended my essay thus: “For far too long, companies have focused on the small pool of martech spending even as the bigger ocean of adtech spending (with 50% AdWaste) has gone unnoticed and untapped. This is the opportunity for Netcore 2.0 along with its partners.”
Netcore 2.0 needs to lead the martech industry in its profipoly transition. The commoditised martech stack…
…needs to be replaced by the Profipoly Stack.
Therein lies the key to Netcore’s transformation to becoming a Profipoly.
How can this be done? How can we at Netcore reinvent ourselves with our 2.0 avatar?
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Netcore – 2
For any shift to take place, people need to change their minds. Therefore, the first step Netcore needs to do is to bring profitability front and centre for consumer-facing digital businesses. They need to be weaned away from the addictive drug of adtech to the business-saving elixir of martech. Good storytelling can make this happen.
- Start with a new and memorable phrase to describe the problem. In Netcore’s case, the word I have been using is “profipoly” (profits monopoly). I tell a story about how companies like Google, Apple and Microsoft have created a profits monopoly which delivers exponential forever profitable growth for them – and keeps competitors at bay. Every business needs to aspire to become a profipoly. And I plan to show them how to do it.
- Show how marketing has made a wrong turn by not focusing on profitable A focus on branding, acquisition, and retention has meant that growth comes at the cost of profits. I show the state of brand P&Ls (profit and loss statement), and how marketing is one of the biggest contributors to profitless (profitless or less profits) outcomes.
- Bring in the agents of change – the breakthrough ideas and innovations. This is the exciting part of the story – where the troubled past can give way to a happy future.
- Show the outcomes – happier customers with memorable experiences, and better P&Ls. All this can lead to sustainable profitable growth.
- End with a roadmap and a hero – the 90-day plan (call-to-action) which needs a “Chief Profipoly Officer” to implement it.
This is where the second step comes in. Businesses need to be persuaded about creating a new role at the leadership level, the Chief Profipoly Officer, who combines marketing skills with financial finesse. The pitch to the three key decision-makers can be as follows:
- CFO: profits now
- CEO: profits forever
- CMO: pathway to CEO
The CMO pitch needs some explanation. Today, most CMOs are lifers. Few make it to the corner office. This is because of two reasons. First, their tenure tends to be just a few years at a business – among the shortest across CxOs. Second, they are not seen to have the necessary understanding of finance and ‘real business’ because of their detachment and disconnect from profits. CMOs need to be persuaded that the path to becoming CEO is by becoming the Chief Profipoly Officer. This is the education and evangelism that Netcore needs to do.
The third step is to pioneer innovations to fix the funnel frictions with industry-leading innovations which “Only Netcore Can” deliver. I have discussed twelve such innovations as part of the Profipoly Stack:
- Catalog and Customer Data
- AI-enriched Catalog
- Large Customer Model
- Unistack
- Digital Twin
- Velvet Rope Marketing
- Unichannel
- Email 2.0
- Atomic Rewards
- Actions Ads
- Progency
- Earned Growth
In the martech industry, Netcore is uniquely positioned to build and deliver on all these innovations.
The fourth step is to create landing products which can get a foothold in digital businesses and generate organic inbound leads at scale. Ideas like the Profipoly Score and unique solutions like Multi-channel Inbox Commerce (across Email, RCS, and WhatsApp) can be good entry points.
The fifth step to drive the expansion to the full Profipoly Stack is to combine SaaS and Service. Just selling a cloud solution is not helping businesses make the most of its capabilities. What they need is a thin layer of services – a Progency, which combines product and agency. Businesses need to be persuaded that Netcore-as-Progency has skin in the game, which is where a new pricing model needs to come in, as I explained in Martech 2.0: Adtech-Style Performance Pricing Transformation. This alignment between outcomes and rewards is crucial for martech to garner a larger share of marketing budgets.
The sixth and final step is to address the “Who”. In its aspirations to build a global business, Netcore needs “Geo CEOs” – leaders in every country. Macquarie Bank’s innovative approach to global expansion was underscored by its introduction of its “loose-tight” approach, as explained in “The Millionaire’s Factory.” Recognising that each geographical market had its unique challenges, opportunities, and cultural nuances, Macquarie empowered regional CEOs to take the helm and tailor strategies best suited for their respective territories. This decentralisation of authority was a break from the traditional top-down, one-size-fits-all approach that many multinational corporations employed. By entrusting “Geo CEOs” with significant autonomy and decision-making power, Macquarie ensured that its strategies were agile, locally relevant, and finely attuned to the dynamics of each market. This approach not only fostered a sense of ownership and entrepreneurial spirit among the regional leaders but also enabled Macquarie to tap into local insights and expertise, driving robust growth and solidifying its footprint across various geographies. Netcore needs to imbue a similar entrepreneurial spirit across its leaders to conquer global markets, one country at a time.
This is the transition Netcore needs to make – for itself and its customers. The prize is the $200 billion AdWaste – which is many times the size of today’s martech industry. This is a unique moment in time: just as Generative AI promises to upend fortunes of companies and industries, Netcore can do the same in the world of Martech with its own profipoly strategy.
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The path to creating a profipoly is deeply rooted in the foundational principles of strategy. Netcore’s potential journey to becoming a Profipoly is a vivid demonstration of time-tested strategic concepts coming to life in the digital age.
By bringing the focus on the long-ignored existing customers of a business, reminiscent of the Blue Ocean strategy’s value innovation, Netcore has the potential to redefine the martech space. The focus on moving away from the red ocean of me-too martech stacks to the blue ocean of a newly minted Profipoly Stack with multiple disruptive innovations is the “invention” that can power Netcore’s “counter-positioning” strategy. Netcore’s five-step blueprint diagnoses the issue with adtech, establishes a guiding policy focused on martech, and lays out coherent actions from pioneering innovations to redefining pricing models.
At its core, Netcore’s strategy embodies these principles. By focusing on the martech landscape and underscoring the importance of deepening customer relationships over mere acquisition, Netcore is defining its “where to play.” In the “how to win” arena, the brand aims to lead the industry in the profipoly transition, leveraging unique innovations. Instead of spreading itself thin in the vast digital landscape, Netcore is making deliberate choices to create unparalleled value in specific areas – especially for B2C/D2C businesses. It’s not just about participating in the martech industry; it’s about setting the gold standard, echoing the very ethos of “Playing To Win.”
Furthermore, the introduction of roles like the “Chief Profipoly Officer” is a nod to the strategic importance of aligning an organisation’s structure with its strategy, echoing Alfred Chandler’s insight. By suggesting a role that blends marketing prowess with financial acumen, Netcore is not just integrating two functions but redefining how organisations should perceive growth and profitability.
Finally, by championing a blend of SaaS and service, Netcore can balance both differentiation and cost leadership, enabling it to cater to a broader range of customer segments while simultaneously driving value.
In essence, Netcore’s potential transition to a profipoly isn’t just about rewriting its destiny but is a reaffirmation of the age-old strategic tenets. By drawing upon these classic frameworks and adapting them to the digital landscape, Netcore can tap into the vast AdWaste spending, exponentially grow the martech category, shape the next chapter of strategy in the digital world, and forge its Profipoly journey.