The Moldy Middle

http://macromental.blogspot.com/2008/07/moldy-middle.html

While taking statistics during my quest to get an MBA and while earning my engineering, the professors always emphasized the importance of finding the statistical mean of any population by using the Central Mean Theorem (a.k.a the highest point of the Bell Curve).

As an engineer, this was essential in order to maximize throughput, minimize cost and waste, and ultimately make a better, faster, cheaper widget. A funny thing happened on the way to the dark side of marketing. I discovered that the only thing in the middle of the road was quite literally dead.

I do not know if you remember store like Bradlees, Ames and Service Merchandise (just to name a few), but they all folded because the environment changed and they were caught trying to service the “average customer.”

Part of that change came when Wal-Mart began it juggernaut in the discount department stores. Wal-Mart did two things right: 1) Focused on “mobile” consumers, and 2) Focused on offering goods to cost (not value) conscious customers. In order to get cost down to bare minimums, Wal-Mart made sure for most of its products, it achieved the lowest price possible for its goods. Wal-Mart is not known for high quality, but it is known for low (and often the lowest) prices.

Still, you cannot buy everything at Wal-Mart (like rechargeable batteries, and Pepperidge Farms). So, there is a window of opportunity for competition (Target). That will be in another blog called Differentiate or Die.

In order to be recognized in business you have to stand out. Essentially, if you try to service the average customer, you will essentially look like everyone else. You must Differentiate or Die. Everything else is white noise.

Unfortunately, most people try to position themselves to service the average customer (the largest area under the bell curve), find that they actually get the fewest customers and the fiercest competition. Actually, when position your product or service, you first have to delve out a niche in one of a very few extremes.

These extremes include:
Price (high versus low)
Quality (good versus average)
Service (personal versus automated or outsourced)
Features (high versus low)
Status / Value (High versus mundane)

Notice volume and profit are NOT on this list, since they are dependent on what extremes you choose.

I know this sound counterintuitive, but look as some of the successes:

Starbucks: They offer a high value / high status; high price coffee (and ultimately reached high volume & profit). Had they been another “average” coffee shop they would have not reached the status they had.

Dell: The offered a low(er) cost computer, with lower customer services (automation) but with a high feature set (custom made).

Proctor & Gamble: They segment their product offerings to cover a variety of extremes within a specific segment (toothpaste, shampoos) etc. To date, they are the most successful consumer goods company in the world.

Toyota: They offer extremely good quality, with a rich feature set (high gas mileage, extras, warranty), for a high value customer.

Of course there are many others. What these companies need to be weary of is the temptation to try to get more market share at the expense of abandoning what made them desirable to begin with. The law of scarcity sometimes is a good thing.

So, if you are starting a new company, or releasing a new product, or looking at how to improve the perception of you existing product, look at what you are tying to do, and see if you are targeting the moldy middle. If you are, make some real effort to move away from that segment as quickly as possible.