Price points are growing at differential rates as companies enter higher end niches to improve profits

Symptom: Growth at the heart of the market has fallen off. As a consequence, several competitors are adding new products. These products are at the higher end of the industry's price spectrum.

Implications for the market:

• The high end of the market is likely to become very crowded.

  • Weak companies under pressure in the main market seek relief in niches rather than withdrawing from the market.

  • Stronger competitors also enter these niches to fuel their continued growth and to improve profitability. Because of their name recognition in the heart of the market, these companies are often quite successful.

  • Existing niche competitors already have an established presence and will not give up customers easily.

• As companies enter these niches and meet other competitors already there, the new entrants must differentiate themselves. The result is likely to be product and service proliferation at an ever faster rate than has existed in the past, which raises costs. At the same time, competitors seeking an easy way to differentiate their business proposition to the customer will also compete on price, causing relative prices to fall.

• As a result, the high end of the market is likely to become less profitable.