What does market differentiation mean?

In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors’ products as well as a firm’s own products.

What are the 3 types of differentiation?

The three types of product differentiation are vertical, horizontal, and mixed. A common example of vertical integration is when two products are similar but priced differently.

What is product differentiation example?

Horizontal differentiation refers to any differentiation that is not associated with the product’s quality or price point. Instead, these products offer the same thing at the same price point. Examples of Horizontal Differentiation: Pepsi vs. Coca-Cola, bottled water brands, types of dish soap.

When to use differentiation as a marketing strategy?

Differentiation marketing can help companies stand out when a product isn’t perceived to be much different from a competitor’s, such as bottled water. The strategy might be to focus on a lower price point or that it’s a locally-owned business. When functional aspects of the two products are identical, non-functional features can be highlighted.

What are the benefits of a differentiated product?

Benefits of Product Differentiation A differentiated product can increase brand loyalty and even survive a higher price point. If a product is perceived to be better in some way than its competitors, consumers will consider it worth the higher price.

How is price used to differentiate a product?

Price can be used to differentiate a product in two ways. Companies can charge the lowest price compared to competitors to attract cost-conscious buyers—the retailer Costco is an example. However, companies can also charge high prices to imply quality and that a product is a luxury or high-end item, such as a Bugatti sports car.

How to create a differentiation-based competitive advantage?

There are several ways an organization can create a differentiation-based competitive advantage for a single product or the company as a whole. Here are some steps to create a differentiation strategy: 1. Decide what you want to be known for. You must have an idea of your expertise in your business.