To add to what Randall, my esteemed colleague, has stated about the Avis story, here is an excerpt from an article I wrote on the subject:

“Quantifying territorial claims is at the heart of the theories espoused by Reese & Trout (R&T;) in the early eighties. To illustrate, R&T wrote, "An important early success in the positioning era was the famous Avis campaign". Here R&T provided a ladder hierarchy model with the first rung reserved for the first brand territorial claim. In the Avis story the ladder represents the rental car market as a category. Hertz owned the first territory, or top rung on the ladder. In 1962, Avis claimed the number two territory or second rung with its slogan, "We're number two, we try harder". It was the first time a company had declared itself as number two.

R&T wrote, " Many marketing people have misread the Avis story. They assume the company was successful because it tried harder." Any company could claim to be trying harder. National Car Rental, the number three car rental company, could claim to be trying harder. "Trying harder" as a claim harkens back to the "unique benefit" strategy days of marketing.

What was unique about the Avis story was Avis' claim of being number two. Avis staked a claim of territory that no one else could own as long as Avis defended it. National could say, "We're number three, we try even harder", but that wouldn't work in the third spot. It would just be copying Avis with a lesser claim.”

Link to article:
http://www.schraff.com/adv/helpdesk/brand_is.php

hope this helps,

Steve

Very often, the #1 and #2 brands do not need to sub-segment their categories. They can appeal to the broadest audience and, to a degree, define the category.

All the other brands need to find a niche and become #1 or #2 in their niche(s).

Read Ries and Trout's book, "Positioning: The battle for your mind." It explains much better than I could in a few dozen, or even a few hundred, words.