While taking statistics during my quest to get an MBA and while earning my engineering degree, 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).
I do not know if you remember stores 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 mythological “average customer.”
Part of that change came when Wal-Mart began its juggernaut with the discount department store. 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 the business world 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, when most companies 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 you position your product or service, you first have to carve out a niche in one of a very few extremes.
These extremes include:
Price (high versus low)
Quality (high versus good or average)
Service (personal versus automated or outsourced)
Features (high versus few; or simple versus complex)
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 sounds counter-intuitive, but look at 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 at a reasonable price.
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.
Comments
So maybe the missing ingredient is some coefficient of market opportunity (i.e. the reciprocal of commoditization potential?). Adding in that factor would seem to yield more useful results.
Just something I have observed over the 15 years of sales & marketing.
I like the quote, "All models are wrong, but some are useful." That's what we have here. The bell curve and supporting data is a model. In your context, it doesn't encompass enough variables to make it useful.
Sorry, I'm sounding too much like an engineer here.
BTW, I used to shop at WM (funny, some as Wast Management) all the time, but I rarely go their any more. I prefer Target....
As for Wal-Mart, I'm not sure I agree there. They seem to be doing better than average in a time when many other retailers are struggling because customers are becoming more price driven. I'm personally not a really big fan of Target just because they carry basically the same Chinese made junk but usually at a higher price because of their slightly fancier stores. I think a lot of people are happy to accept boring if its cheaper.
If you go to Wal-Mart and purchase a colored tee, it costs about $5 and is 50/50 poly-cotton, if you go to Target and purchase a similar tee, it costs $6 but is 100% cotton. The difference is that the $6 tee will last twice as long at the $5 Wal-Mart piece.
People are starting to figure this out (at least I have and I am not too bright).
If you look closely, many of the exact same things that Target and Wal-Mart carries, Target is less expensive.
I totally agree, less expensive is in vogue now, but when the economy comes back (and it will) watch for the shift.
I have to say that I haven't noticed what you say to be true about such things as socks or underwear. Not only is Wal-Mart usually cheaper for identical name brands like Fruit-of-the-Loom, Hanes, etc, but they actually had socks that were Made-in-USA which Target did not. To be fair, Wal-Mart had some imported socks as well, and not all the imports in either store were from China some were from Mexico or Egypt (if memory serves).
Walmart vs. Target reminds me of the same phenomena. Walmarts can be dingy (depending on where you go), whereas Target seems to position themselves as upscale. Problem is Target's prices are significantly higher than the WM equivalent, so I will often put up with Walmart for the lower price. After all, when I can pay $2 at Walmart for a lime juicer, and it costs $5-10 at Target, I'll hit Walmart. If the prices were the same though, I prefer Target.
The definition of a "population" is key here....