The latest McKinsey Quarterly (requires subscription) has an interview with Electolux CEO Hans Straberg in which he describes how Electrolux escaped the middle-market trap.
The middle-market trap happens when a market gets polarized with low cost Asian brands taking the low end of the market and premium brands growing at the high end of the market at the expense of the middle-of-the-road brands. This is a common occurrence in markets, a threat to which most companies respond by cutting costs. History is littered with companies – some well known icons – that have cut themselves into oblivion.
One of the main changes implemented in marketing was the way they segmented customers. Instead of using the traditional industry segmentation based on price and a “good-better-best” hierarchy they started segmenting customers by lifestyle – ending up with more than 20 different product positions. Amazing how companies are only now discovering the power of actual customer scenarios as a basis to segment markets – a technique described by Tom Peters in his very early books.
Another change they implemented – which allowed them to play at both ends of the market – was to set up two different business models, with separate sales forces, to serve the value end of the market differently than the premium end of the market.
Mass-segmentation does not work anymore, except perhaps for some commodity products – like gas, or corn. Most mass markets, however, behave like collections of micro-niches and benefit from being served the same way you would serve customers in the long tail.