You vs the competition: Same profits equals same products
Like most of you I have participated in workshops where the opening question is, "why are we in business?" Depending on the group (profit/non-profit), function, time of day and the latest sports scores the answers are variously stupid, prudent, sycophantic or vanilla.
Some regurgitate the latest corporate consumption ("to create shareholder value") while others are more thoughtful ("to relieve stress on pet owners at a difficult time" - a company helping families re-locate their pets to the new home overseas.)
Inevitably "to make more profit" is mentioned and this one is often given a Silver to the Gold of "creating shareholder value" in the Award of Cringeable Comments.
But this is doing profit (or at least gross profit) a disservice.
Distinctiveness in profits = distinctiveness in products
You see, if your profit margins are the same as your competitors, it is likely your product offers are too.
Profits are a proxy for the difference you make the lives of your customers. If you make a bigger impact on their activities, well being or emotions than your competitors, it will be reflected as a differential in your profits.
I know, I know, there will be issues on differences in costs and some operational models give you some extra margin, but these pale in comparison the margins of B&D (better and different)
If you have an edge, if you’re close to the market and if you have the confidence to price appropriately, the law stands.
Look at the phone market below. You have a product that is better and different than the competition, price it accordingly (slide 1), then scale it and, bingo—big margins (slide 2).
Quite simple really, it is applied customer R&D® at its best.
The market speaks. If your profit margins are the same as your competitors you’ve got some customer feedback—without spending a penny on market research.
Data source: phone area