Medium sized customers are under pressure from both their larger and smaller peers

Symptom: Medium size customers in the industry are coming under pressure from competitors.

Implications for the market:

  • In a hostile market, medium-sized customers are at a competitive disadvantage. Large customers get sizable discounts and pass these on in their own prices, making medium-sized customers relatively high on price compared to their larger peers. Small customers, who have no price leverage, often choose to outperform the medium -sized customers on service. Caught in the middle, the medium-sized customer has no evident strength.

  • These medium-sized customers , in turn, put increasing pressure on their suppliers, which makes this customer segment the most difficult to serve. Some medium customers demand price concessions, others want high performance, and still others want both.

  • Despite the difficulty in serving them, medium-sized customers are important to a supplier's overall strategic position. They can offer greater volume than the small customers and greater returns than their larger counterparts.

  • Picking the right set of medium-sized customers to serve, although difficult, will increase the chances of long term success in the industry.

Recommended Reading
For a greater overall perspective on this subject, we recommend the following related items:


Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Finding the Open Door"
    Volatility is the movement of volume from one supplier to another. A company can not gain volume unless customers are willing to make a change in suppliers. Volatility has special rules in hostile markets.

  • "The Big Slice of the Pie"
    The head of one industry leader explains his company's insistence on being a key supplier to each of his customers: "The guy with the big slice of the pie doesn't go hungry." The workings of the typical hostile market provide solid support for this philosophy.

  • "Use Subtle Strategy in Tough Markets"
    A hostile market operates differently than a market with "normal" competitive conditions. But as difficult as a tough market can be, it can also present an astute management team with an unusual opportunity.

  • "Which Customers Matter Most?"
    Average customer profitability differs dramatically in non-hostile and hostile markets. Does the relative importance of one customer versus another change as well? The answer is less evident than many business leaders believe.