Why Companies Don’t Compete in the Middle Market

Brands always need to differentiate themselves. In analog times, that differentiation didn’t have to be dramatic. That’s because companies had limited visibility into individual customer behavior and journeys, and feedback to the actions they took was slow, coarse, and expensive to collect. In such an environment, the middle of the market offered cover, and the game was to make incremental improvements that were harder for competitors to observe, or more difficult to copy, but sufficient to sustain profitability in the short-term. That logic has collapsed in the digital age. Customer-journey data is ubiquitous, granular, and available in real time. Marginal advantages become transparent immediately, and can be copied. Companies in the middle get squeezed by both low-cost players who use data to strip out waste with precision, and by specialty players who use data to deliver resonant, personalized experiences that justify premiums. The middle of the market no longer offers shelter, so companies need different strategies to survive.