Fast growing competitors focus on the industry’s large customers

Symptom: Fast growing competitors are growing by focusing on large customers.

Implications for the market:

  • In lucrative markets, pricing is more uniform than in hostile markets. As a result, large customers tend to subsidize smaller customers. In the average market, large customers are the primary source of profits for all industry players.

  • The picture is quite different in hostile markets. Large customers receive substantial discounts. In many cases they become unprofitable as a group. The source of profits then shifts to other customers. Then companies are compelled to make careful tradeoffs among volume growth, prices, and costs to balance profitability. No large company can subsist serving only large customers once an industry turns hostile.

  • In today's market, the largest customers are now getting notably better prices than the medium and small-sized customers. The market is becoming hostile, and past profit dynamics are changing. Every company in the industry must reconsider the mix of customers it serves and the cost structure it uses to serve each.

Recommended Reading
For a greater overall perspective on this subject, we recommend the following related items: