Practical Sales Training™ > How To Convert > Hotellings Law
What is Hotelling’s Law?
Hotelling’s Law is a principle from economics that explains why competitors often end up looking and sounding the same. Instead of spreading out and being different, they move closer together – offering nearly identical products, services, or messaging.
It’s sometimes called the “Principle of Minimum Differentiation.” A simple example is two ice cream sellers on a beach: rather than standing apart to serve different customers, both sellers move to the middle, crowding together and competing head-to-head.
In short: Hotelling’s Law shows us that competition tends to create similarity, not variety.
How does Hotelling’s Law work?
Hotelling’s Law happens because businesses naturally want to capture the largest share of customers possible. Moving closer to the “centre” feels safer—whether that’s in location, product features, or marketing messages.
Here’s how it plays out:
-
Location: Competing stores open next to each other instead of spreading out.
-
Products: Features and pricing converge until everything looks the same.
-
Marketing: Businesses copy each other’s ads, slogans, and offers to avoid missing out.
The result? Customers struggle to see the difference—and competitors end up in a race to the bottom.
How can you use Hotelling’s Law in business and sales?
Understanding Hotelling’s Law gives you an edge. If you know that most businesses drift toward sameness, you can deliberately choose to stand out.
Here’s how to use it:
-
Differentiate your message. If everyone else is saying the same thing, make sure your sales message is clear, unique, and memorable.
-
Create true choice. Instead of sitting in the crowded middle, position your offer at the edge where customers see real contrast.
-
Avoid price wars. When products look the same, price becomes the only difference. Stand apart on value instead.
Key takeaway: Hotelling’s Law explains why competitors cluster—but if you resist the pull, you make it easier for customers to choose you.
Example
Fast food companies are often cited next to one another and sell very similar things…
See also
