Take a walk through a farmers market and you will see an array of local produce. A vendor may feature items that are nearly indistinguishable in price or quality from a stall down the row. One could easily assume that farmers markets operate on "rural community values." In reality, they illustrate a profitable marketing strategy known as co-opetition.
What unifies these agricultural entrepreneurs is the organization of the farmers market, an entity that exists separate from the vendors themselves. The farmers market doesn't compete with the farmers. It’s a cooperative, enhancing their ability to grow as small businesses by facilitating a space for commerce. It also allows them to form strong relationships with consumers, offering high-quality products alongside high-touch service.
Why should any one of these farmers hang their shingle next to direct competitors, haggling with consumers over the price of a pound of carrots or a dozen eggs? Because the real competition isn’t the vendor in the next stall — it’s the big-name grocery chain down the street that poses the greatest threat to a farmer's livelihood.
By virtue of its size and corporate resources, the grocery chain is a super-competitor when pitted against any single farmer. However, when those same farmers come together, they correct the balance of power and capture market share that once belonged to the grocery chain.
In his altMBA program, best-selling author and marketing expert Seth Godin phrases it this way: “It’s bigger than you. The network effect is fueled by Metcalfe’s law — the power of a network goes up with the square of the people on that network. The more people who use fax machines (or Twitter, if you want to update the idea) the more powerful the machine is.”
Similarly, an increase in the number of vendor stalls actually adds critical mass and value to the farmers market as a whole, helping it better compete with the major grocery stores.
The success of a single farmer can help the others as well. Even if a few vendors are favored above others due to trendy or in-demand offerings, their success benefits everyone. After all, that increased visibility draws additional traffic to the farmers market.
Co-opetition and Metcalfe’s Law are closely intertwined, as the example of the farmers market bears out: The value of the network (“farmers market”) increases many times faster than the linear increase in the number of connections.
Co-opetition plays out in other industries, such as automotive manufacturing, e-commerce, and restaurants. The principle is proven; could it work for your institution? Julie Bowser, IBM Global Services Consultant, lays out some compelling questions in this article to help companies uncover opportunities for co-opetition. Here are a few (slight paraphrase) that we liked in particular:
- Who are the players in your network and how can they collaborate to maximize value?
- Which relationships are complementary in nature — which companies can you work with that can add value to what you provide?
- What can you do to sustain your competitive advantage over time?
At Kasasa, co-opetition is more than a novel anecdote; it’s an essential strategy. We believe it has serious implications for community financial institutions and their struggle against the megabanks. By joining together in a common space and focusing energy against the threat of super-competitors, institutions like yours can ensure the future of community finance for generations to come.
NOTE: If you’re interested in reading more about how co-opetition can help your institution, check out this piece that our CEO Gabe Krajicek wrote last year.