Are You Stuck in the Middle?

Are You "Stuck in The Middle"​?

Kristopher Ball, MBALeisure Strategy Consultant; Master ofBusiness Administration; Availabl... See more5 articles

  

Leading on from my previous article, I am following up by discussing the modern day 'middle market'. Rather than being stuck in the middle based purely upon pricing, in todays market, companies need to ensure they stay away from the middle in relation to their strategic positioning.

So what's the difference? As I mentioned in my previous post, in the past being stuck in the middle largely meant that companies had to make a choice on pricing. Go premium, or get into the low cost battle...and for many this didn't end too well did it?

Using the generic strategies model, it is easier to consider the modern day market positioning and being a 'mid priced' operator no longer means that you are stuck in the middle if you are able to maintain a competitive position. In todays market, you are stuck in the middle by being undifferentiated, trying to be 'all things to all people', by representing an inferior offer, being unable to compete with low cost operators, or by not being broad or narrow enough.

"You can't be all things to all people." Michael Porter

 

Consider a club that's stuck in the middle...offering an average range of activities, to a reasonably broad range of people. So they're in the Red Zone so to speak....Why is this a risky place to be?

Well if a low cost operator enters your market, with a good range of activities, economies of scale and generally good quality facilities, then your customers who want better value will undoubtedly down trade, you just don't have the scale and efficiencies to compete on price. Or vice versa, those customers who want more premium service and quality are likely to up-trade to a more premium operator, differentiation generally costs money to create. Or conversely, if you have a customer who really just values a niche activity (let's say group exercise), then a new boutique operator coming into your market is going to cause serious disruption. You are in a vulnerable position from all angles when you are stuck in the middle.

"There is only one winning strategy. It is to carefully define the target market and direct a superior offering to that target market." Philip Kotler

Various Routes to Competitive Advantage.

So if you are an operator who is looking for change, perhaps a start-up looking to find your market position, its not all about pricing. Utilising the above model, as part of your overall strategy, can help you to create a unique, competitive position. Let's leave the low cost operator position for now. Entering that market at this stage generally requires significant scale in order to compete, or to build those economies of scale over a period of time.

Let's look at differentiation in a broad market. What are the ways we can get out of the middle and move towards differentiation leadership? Well in general we can look to provide differentiation in several ways:

  • Through the development of superior customer experience (CX). Can you provide a unique premium service style the is consistently better than your competitors?
  • Investment in product and service or brand development (which can be expensive).
  • Define a more specific set of target customers, then positioning your broad product offering to offer a far superior offering for this target. By narrowing your target slightly, you can develop your product more in the right areas and knowingly 'trade off' where we don't want to compete.

So if your company / club is in the middle, probably neighboured by lower cost operators and heavily invested premium brands, there are ways of getting out of the middle, solidifying your market position, without having to compete on price or investing significantly. By careful planning, market insight and a clear vision, you can gain advantage with the right strategy.

If you create a perfectly positioned offering, for a carefully selected (and understood) target market, then the entry of a low cost operator, or a more expensive offering, will undoubtedly have less impact.

Narrow Focus Examples

A more clearly defined narrow market, leads to significantly better positioning, expertise and experience. This philosophy is perfectly represented by the boutique market. Boutique clubs have numerous clear trade offs, not offering a wide range of activities to a wide rage of consumers. By narrowing the focus and positioning their product perfectly to the needs of their target market, this leads to clear competitive advantage. Let's say the target customers of a boutique club are time poor, well off, willing to pay for a superior product, they want to be part of something great. What we therefore see positioned to these customers has led to product offerings that tick all of the boxes and we have seen multiple ways that boutique brands have capitalised upon this.

I still believe the health & fitness market is going to grow and become more diverse. Not just in the narrow boutique market, but there are still unexplored market positions in the broad and differentiated markets. 

There's room for a big operator to still develop a dominant market position in the broad market too, driven maybe by Blue Ocean Strategy, which gives the ability to drive pricing and not have to compete with the wider market. There's also room for plenty of low cost / narrow focus companies to enter the market. If you're stuck in the middle, think about how you are going to make your positioning more defined and unique ad capitalise on available market positions.

Let's Talk.....

Again I want to keep it brief, but let's talk! Let me know in the comments what you think of this way to position businesses? Where do you see the market going? What competitive positions do you still see as being developed in future?

Thanks for reading :-)

Kris

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Kristopher Ball, MBA
05.02.2019