The first is migration towards players in the no-frills or low-cost niche. These are industries where customers just want the lowest price and don’t find any supposed variation in quality plausible. Now, this is always and everywhere the case with true commodities—our classic bushel of wheat or today’s gallon of gas—but it’s also true with goods and services such as groceries at retail and virtually the entire family tree of computers, from servers to desktops to laptops and notebooks. (I grant you Apple has staked out an unusual position here, but they are an extraordinary firm performing feats more mortal firms should not attempt and cannot achieve.)
The second is basically the opposite of the first, namely migration towards the high end. Here everyone seems to coalesce around the view that a certain pretty high level of quality is the minimum required or you’re not even going to put the offering in your consideration set.
We can all stipulate that major surgery for a loved one or close friend is squarely in this category, but there are other slightly less obvious examples as well. One pair of markets that has moved in this direction—for which I give the geniuses at consumer packaged goods companies extraordinary credit—is the pair of markets for razors and for toothpaste.
It used to be that a single blade was state of the art, but today we’re approaching the half-dozen blades per razor milestone, with or without battery power, with or without lubricants and emolients, with available handles of luxurious materials, and as for toothpaste, the generic green cavity-preventing variety of yore is almost nowhere to be found, and in its stead we have probably hundreds of variations from all natural to tartar prevention, whitening, baking soda/peroxide, striped, kids’, sensitive teeth, and on and on.
A few decades ago, who knew that we needed these things? But need them we clearly do.
We can also cite Apple here in a less defensive way, for having singlehandedly positioned the market for MP3 players at the high end. Indeed, some of you probably did a double-take at the phrase “MP3 players”—I’m referring of course to iPods.
Now, in a way, each of the foregoing markets is simple, even simplistic, when it comes to analysis. At the no-frills end, competitors who can’t lower their costs far enough have little choice but to surrender. And at the high end, if you can’t deliver superb quality, with a reputation for same, you’ll never get out of the gate. Not much more to be said.
So at last to the Hollow Middle.
