The majority fallacy is the erroneous belief that a company targeting the largest segment of the market can increase its number of potential customers and gain the biggest profit. It leads to a high level of competition in this segment.
Different types of businesses use segmentation to appeal to different groups of customers by addressing their needs. On the contrary, there are also companies that prefer to use one marketing campaign for an entire audience.
Advantages and Disadvantages of the Majority Fallacy
Some companies assume that directing their product at the largest audience segment can be very profitable because they will reach more people and receive higher revenue. To confirm or refute this assumption, let’s consider the advantages and disadvantages of the majority fallacy.
Pros of majority fallacy:
- the opportunity to reach more potential customers;
- companies can establish themselves faster if they have a competitive advantage;
- brands can create one marketing campaign to reach out to their entire audience.
Cons of majority fallacy:
- overlooking the huge number of competitors;
- the audience of small segments remains unserved although they might bring greater results for the business.
According to BusinessTown, 90 to 95% of all startups fail because they can’t find the right target market. So the key to success is to clearly and correctly define your target audience. The problem that occurs here is that companies often target the biggest market segment that aims at reaching more potential clients and receiving the biggest profit. As a result, businesses face huge competition. Although the majority fallacy is inferior to the alternative approach of targeting small segments, it is still often found among different companies.
To explore the majority fallacy in more detail, let’s see an example.
Example of the Majority Fallacy
Now that you know the pros and cons of the majority fallacy, let’s walk you through an example.
Let’s imagine there are several fast food restaurants located near the campuses of two different universities. The location is great as students can visit any fast food restaurant during their break. However, there is a problem — the crowd of students increases the competition among stores and the number of competitors is constantly rising. Brands are then forced to compete with each other to attract more people with various special offers. As a result, each fast food store gets a marginal amount of revenue but no one receives high revenue.
Simply put, the majority fallacy is a strategy error that misleads companies by stating that a brand should direct their product to the entire audience or its largest segment. It results in some complications, among them, tons of competitors.
Last Updated: 08.07.2021