"In the United States and around the world, the consumer markets are bifurcating into two fast-growing pools of spending. At the high end of the market, consumers are trading up, paying a premium for high-quality, emotionally-rich, high-margin products and services. At the low end, consumers are relentlessly trading down, spending as little as possible to buy basic, low-cost goods that still deliver acceptable quality, reliability, and, increasingly, elements of fashion and current design. In between the trading-up and trading-down pools lies a vast expanse of mediocre, often low-margin, goods that offer neither distinctive emotional appeal nor better value than cheaper competitors. Whenever they can, consumers steer clear of them. Many businesses, that have long prospered by bringing midprice products to middle-market consumers, suddenly find themselves facing “death in the middle.” In the television category, for example, Sony is facing death in the middle. Sony has been slow to offer high-end plasma and LCD technologies, clinging instead to conventional TV tube technology, and watching as lower-cost Korean manufacturers steal market share.

Companies that succeed in this bifurcated market do so by understanding the attitudes, behaviors, and values of the middle-market consumers who are driving the transformation, and constantly adjusting and reinventing their product offering to satisfy the ever-changing “value calculus” of the consumer. This is not easy to do, because today’s consumers are highly-skilled “shopping experts” who view the purchasing and consumption of goods as an essential activity of modern life―a skill, a pastime, an experience, and a duty. They are very good at separating truth from charade, and distinguishing marketing claims from real product benefits. They care about the application of technology, product quality, and features and accommodations to fit their specific needs."