The answer just has to be ‘Sustainable Margin’.
An enterprise can only do three things to increase margin, however you choose to define that term.
- Lift prices.
- Expand sales.
- Decrease production and operating costs.
Options 1 and 2 are often seen as mutually exclusive, but truly successful marketers prove the opposite. The gold standard here is the Apple iPhone, 15% market share of volume, 85% market share of industry profitability.
Marketing has at least some control over the prices and sales efforts, but usually little over the operating costs.
None of these strategies are easy, neither are they short term.
It would seem that a focus on the drivers of margin will pay big dividends
What is the biggest driver of margin?
Brands.
The greatest store of economic value we have ever seen.
Would Apple have been the first trillion dollar business without the premium held by the Apple brand?
No. It would be in the gutters scrapping with Samsung, that also happens to be one of its key suppliers from whom they buy screens. I bet that Apple headquarters is looking for an alternative supplier for some price competition, and that Samsung is investing in the tech in order to hold and enhance the margins they would be making from their wealthiest customer.
In a homogenising world where it is getting harder and harder to build a brand, a long term intangible asset it is becoming ever more crucial that you do so in order to protect margins and remain competitive.
Like Rome, brands are not built in a day, and you need experts doing the building.
Header photo courtesy Tom Shockey via Flikr.
