Apple’s launch of the iPad is a gamble in more ways than one. To start with, it’s obviously a bet that there are millions of people looking for a new way to surf the Web, watch movies, and read magazines. But it’s also a more fundamental gamble; namely, that people will pay for quality. Starting at five hundred dollars, the iPad is significantly more expensive than its competitors. But Apple’s assumption is that, if the iPad is also significantly better, people will happily shell out for it (as they already do for iPods, iPhones, and Macs).
For Apple, "build it and they will pay" is business as usual. But it’s not a universal business truth. On the contrary, companies like Ikea, H. & M., and the makers of the FlipVideo camera are flourishing not by selling products or services that are "far better" than anyone else’s but by selling things that aren’t bad and cost a lot less. These products are much better than the cheap stuff you used to buy, and they tend to be appealingly styled, but, unlike Apple, the companies aren’t trying to build the best mousetrap out there. Instead, they’re engaged in the "good-enough revolution." For them, the key to success isn’t excellence. It’s well-priced adequacy.
These two strategies may look completely different, but they have one crucial thing in common: they don’t target the amorphous blob of consumers who make up the middle of the market. Paradoxically, ignoring these people has turned out to be a great way of getting lots of customers, because, in many businesses, high-and low-end producers are taking more and more of the market. In fashion, both H. &M. and Hermes have prospered during the recession.
While the high and low ends are thriving, the middle of the market is in trouble. Previously, successful companies tended to be attracted toward what historians of retail have called the Big Middle, because that’s where most of the customers were. These days, the Big Middle is looking more like "the mushy middle". The companies there—Sony, Dell, General Motors, and the like—find themselves squeezed from both sides. The products made by midrange companies are neither exceptional enough to justify premium prices nor cheap enough to win over value-conscious consumers.
This doesn’t mean that companies are going to abandon the idea of being all things to all people. If you’re already in the middle of the market, it’s hard to shift focus—as G.M. has discovered. And the allure of a big market share is often hard to resist, even if it doesn’t translate into profits. According to one estimate, Nokia has nearly twenty times Apple’s market share, but the iPhone alone makes almost as much money as all Nokia’s phones combined.
premiumCompanies like Ikea focus more on