Extreme markets segments era

Market polarization as a trend is not new. On the contrary, it has been going on for the last years. What it is happening, maybe, due to fast changes taking place, is that has been unnoticed for some, while for others has become something normality.

Global trends

In the first place, unstoppable increase of technology is changing social, environmental, political, cultural, educational, normative and heath sectors, among others. It is generating a deep impact within economic areas. Supply and demand model is in constant movement and volatility is within its DNA.

Secondly, from the markets point of view also a transformation is rising. Local and captive markets are disappearing, moving towards competitive and global ones.

On the other hand, these markets are polarizing. The time when most products and services were low added value, with a medium wide range and very few with the premium tag, is becoming to an end. From now on, a new path will open. There will only be either low or high added value products and services. Middle areas, like the previous market model, are fading-out.

From this point view, enterprises and industry, as wealth generators, must be prepared to face these global changes and trends in order to become competitive and being able to survive. Both, competitiveness and survival, will become indissociable.

There is convergence between enterprises and costumers, whom draw these polarized markets, where products and services are sold and bought, but only under two categories: low cost or premium.

Besides, it is not any longer either Zara or Hugo Boss, it goes beyond these borders. It has to do with the Zara and Hugo Boss dichotomy. In other words, market segments cross: a consumer will turn IKEA to furnish her/his home, but will buy a Louis Vuitton hammock. Just like that.

Since the beginning of this new trend, enterprises have reoriented their business model to jump out of the medium area. There they were offering not so low, but not so added value products and services.

There are enterprises that have decided to strongly commit with high added value products to offer to their costumers. On the other hand, others have specialized on the low cost products and services. It is up to the costumer.

What’s next?  

A simply example of what is going on right now is Nespresso.

They were placed traditionally within an intermediate rank, middle class white collar oriented. Although it was also manufacturing its own coffee machines. This orientation almost took them to bankruptcy.

Nonetheless, with an extremely intelligent marketing strategy the situation turned upside down. The brand decided to present its products as a luxury brand taking a step forward premium targets with high added value, offering a different sight. In order to put itself there, it decided to get the best shops in the world’s most important cities. Not only made and innovation effort with its product, but with its business model jumping out of the intermediate position. Its current revenue is above 4 billion dollars.

Other examples of businesses that have committed strongly for low cost can be found among airline companies: EasyJet, Ryanair and Norwegian, besides government aid, are increasing their passengers, year after year, as well as their benefits.

Enterprises able to understand these keys and ready to strongly commit for a business model in one side or the other will be the ones that will encounter great opportunities with high profits. They will be competitive and will be prepared for an imminent future. There the intermediate position will become a dead zone.