Presh Talwalkar has an elegant explanation on why competing entities in an environment where demand is linearly distributed (like two burger stands on a beach) tend to cluster in the center of demand.

The intuitive explanation is this: Imagine two burger stands on a straight beach a mile long with the beach crowd evenly distributed along its length. Customers will gravitate towards the closest stand. If one stand was a quarter mile from the left and the other was a quarter mile from the right, they would have an equal number of customers.

But if one of the stands moved slightly towards the center, it would gain more customers and the other stand would lose those same customers (a zero sum game). So the optimal position for both stands is dead center i.e. on top of each other. That gives them both 50/50 market share and prevents the other stand from gaining more market share.

…even though it causes people on the beach to have to walk further to get a burger.

Check out Presh’s blog entry for a full explanation and accompanying graphics. He relates this to why politicians tend to position themselves in the political center and why news channels all carry the same stories.

Bringing this back to the real world, I wonder about things like goodwill, brand loyalty, pricing power, brand cachet and so on. Positioning yourself in the center of the beach, in the center of the political spectrum or, if you’re a news channel, carrying the stories everyone else carries does not engender much love in your target market.

If a competitor were to come along and position themselves off-center, they may sacrifice a portion of the market, but develop fierce loyalty among their customers for being better and being different.

This brings to mind many famous brands who started with a cult following:

• Pategonia
• Cervélo
• Apple