Marketing 0

Polarization of Markets
Markets no longer consist of a wide range of offerings from the
cheapest to the most luxurious and have started to polarize between
the top and bottom ends. The middle segment is disappearing as
people either trade down to quality no-frill offerings or trade up to
more premium luxury offerings. As a result, top and bottom players
are growing while edging out the midmarket players, which are
struggling to stay relevant. And it is happening across product
categories: grocery and fashion retailers, food services, airlines, and
automotive (see 
Economic crises, especially the one accompanying the recent
pandemic, seem to have a lasting impact on the spending of low-
income customers. During difficult times, there had been a surge of
discount shoppers. Customers tried basic, low-priced products to
save money. They discovered that the quality was acceptable and had
become accustomed to it. Some even realized that they had
previously been overspending and would never go back to the
higher-priced brands. This trend is coupled with recent quality
improvements in low-cost products, which have been exceptional
due to cheaper but more efficient manufacturing technology.

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On the other side, higher-income customers were less prone to and
even benefited from crises. The crises and the pandemic had
reminded them of the importance of wellness and therefore led them
to premium products and services that offer exactly that. It also
remains true, especially for the newly rich, that earning more is often
equal to spending more. Being affiliated to an exclusive community
also encourages them to live similar lifestyles as their peers and show
off their success. Thus, they will always aim to trade up to higher-tier
offerings.
To adapt to the trend, industry players are pursuing either cost
leadership or customer experience strategy. Low-cost providers focus
on the intrinsic value of goods and services. It is about removing the
bells and whistles and doubling down on the core benefits while
convincing people of no quality compromise. They shift strategy
away from bundled to unbundled value propositions and let

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customers pick and choose the product and service configurations
that work for them.
Meanwhile, the premium-priced brands emphasize augmenting the
extrinsic value of their offerings. Total-customer-experience
innovation is the name of the game, providing customers with top-
quality ingredients, exclusive sales and service channels, and luxury
brand narratives all in one bundled package. They also attempt to
grow their share by inviting more middle-tier customers to trade up
by offering affordable luxury offerings.