How to maximise profits in a competitive market
Fridge manufacturers have a problem. Not only do they operate in a competitive market, they can’t make the doors big enough… not to hold the milk but to hold all the milk options we now have!
I remember in the early 1990’s my Mum had me try soy milk. It caused some trust issues for a while and it was cow all the way after that.
Add 30 years and in my own household there are 5 of us and in the fridge, 6 different types of milk!
Don’t ask, I can’t work it out either. Getting your choice of milk into prime position on the fridge door is now the ultimate passive aggressive power play.
When a competitive market isn’t a growth market!
In the early 2000’s a dairy farmer was getting around 34 cents a litre for their milk. Right now it’s 72.6 centre a litre, through it is forecasted to drop to 62.5 centre a litre in the next financial year*.
It’s alarming that in a quarter of a century, the price a dairy farmer gets per litre has, at best, doubled. So, in reality, the price farmers actually get after their costs has barely moved in 25 years.
The total value of farm gate milk is about $4 billion a year. It’s an ultra-competitive market, but sadly not a growth market. Milk is a tough business.
Enter, someone who thinks differently!
In the early 2000’s the A2 Milk Company was founded. It took them over 10 years to make a profit, it went broke at least once and both the founders died. Like I said, milk is tough business.
Today, the A2 Milk Company holds 15% of the Australian milk market and is valued at almost $4 billion. They are worth as much as what 100% of Australian dairy farmers get paid in a year.
And what makes this even more fascinating is that they even own any cows!
So, how are they so successful in an otherwise saturated and competitive market?
Value add and point of difference is the difference. It’s your niche!
They own a point of difference and a niche in an otherwise cutthroat commodity market. A2 milk!
If you think it’s not fair that the dairy farmer is getting up at 4am and working 7 days a week, while a company that doesn’t even own a herd of cows dominates their market, I get it, but it’s how markets work, whether we think it is fair or not.
The value accretes to those who add the most value, real or perceived.
“If you sell a commodity, you get the commodity price. If you add value that the market wants and no one else can competitively provide, you have a specific niche and therefore more valuable and profitable business.”
How do you apply this to your business and competitive landscape? How do you position yourself and add value to your customers so they keep coming back, time after time?
We ask our clients a series of questions to assist with distinguishing their niche, their point of difference and how they can stand out in a competitive market.
Who do you serve? Who are your clients? What are their beliefs, needs and desires?
What needs are not being met in the current competitive market?
What value do you or can you add to the client journey that others don’t?
What is your business’ point of different in the competitive landscape? What do you do differently?
What expertise do you offer that others don’t?
What can you offer that creates a loyal customer base who buy from you time and time again?
Creating a niche can increase profitability but minimising competition, positioning you as a leading expert in your competitive environment and establish a loyal customer base by ensuring customers want to buy from you time and time again. Look at what the A2 Milk Company did… it is possible.
*Source: Department of Agriculture