Not just on what day, but at what hours of each day, so as to minimize valuable space for backup stock and to reduce inventory costs? The proper quantity and flexibility—that is, quick and hassle-free responsiveness to snags in delivery quantities and times—are also expected. Finally, preferential treatment may be specified in case of shortages. Specific prices for specific quantities for specific lengths of time.
In the case of a change in list prices, the terms contain negotiable parameters, perhaps linked to such indexes as moving price averages of scrap and other steel-making ingredients over specified periods. The terms may also be reflected in discount structures related to the promptness of payment and add-on provisions for extended payment periods. Support efforts.
Depending on what the uses of the product are, the purchaser may expect special applications advice and support.
New ideas. All this may be well known, but the underlying principles encompass much more. The failure to fulfill certain more subtle expectations may reflect unfavorably on the generic product.
A shabby brokerage office may cost a realtor access to customers for his or her properties. The customer may actually expect and want less. Different means may be employed to meet those expectations. Hence differentiation follows expectation. Differentiation is not limited to giving customers what they expect.
What they expect may be augmented by things they have never thought about. When a computer manufacturer implants a diagnostic module that automatically locates the source of failure or breakdown inside his equipment as some now do , the product goes beyond what was required or expected by the buyer. It has become an augmented product.
When a manufacturer of health and beauty aids offers warehouse management advice and training programs for the employees of its distributors, that company too has augmented its product beyond what was required or expected by the buyer. In every case, the supplier has exceeded the normal expectations of the buyer. In the steel example, it can be done by developing better ways of fabricating and coating the product or by reducing thickness to cut weight.
Not all customers for all products and under all circumstances, however, can be attracted by an ever-expanding bundle of differentiating value satisfactions. Some customers may prefer lower prices to product augmentation. Some cannot use the extra services offered. Steel users, for instance, once dependent on mills for applications help and engineering support, gradually grew sufficiently sophisticated to free themselves of that dependence—a freedom which, incidentally, led to the rapid growth of independent steel distribution centers in competition with the mills.
Now the centers, which have distinguished themselves from the mills by faster delivery on standard grades and sizes, a wider item mix, and ability to handle small orders, have augmented their product by doing more minor fabricating and adding certain specialty steel application services.
As a rule, the more a seller expands the market by teaching and helping customers to use his or her product, the more vulnerable that seller becomes to losing them. A customer who no longer needs help gains the flexibility to shop for things he or she values more—such as price. At this point, it makes sense to embark on a systematic program of customer-benefiting, and therefore customer-keeping, product augmentation. The seller should also, of course, focus on cost and price reduction.
The augmented product is a condition of a mature market or of relatively experienced or sophisticated customers. Not that they could not benefit from or would not respond to extra services; but when customers know or think they know everything and can do anything, the seller must test that assumption or be condemned to the purgatory of price competition alone. Everything that might be done to attract and hold customers is what can be called the potential product.
For the steel user, the offering may include:. Only the budget and the imagination limit the possibilities. But what the budget is and ought to be is often a function of what is necessary to being competitive in all the dimensions of the potential product. Offerings will vary with conditions—economic conditions and competitive conditions. Competition may be a function not simply of what other steel suppliers offer but also of what suppliers of substitute materials offer.
Reordering responsiveness is not nearly as important to buyers in good times as in bad—except when a competitor strategically uses the good times that is, when demand is high and supply short to accommodate a large prospective customer in order to get a foot in the door. Nor are the ingredients of the described classifications fixed. As with most things in business, nothing is simple, static, or explained very reliably by textbook taxonomies.
One thing is certain: there is no such thing as a commodity—or, at least from a competitive point of view, there need not be. Everything is differentiable, and, in fact, usually is differentiated. Durum is a variety of wheat produced in rather small quantities and almost exclusively in three counties in eastern North Dakota. Its main use is in pasta. What is product differentiation? Why is product differentiation important? Benefits Benefits are the values a customer receives when they purchase your product or service.
Target audience Your product's differentiated benefits should align with the interests, needs, and values of a defined target audience. Competition You can only differentiate your own product once you know what's already on the market. How do you know if your product is differentiated? Types of product differentiation Here are a few ways customers use product differentiation to make buying decisions.
Vertical differentiation Vertical differentiation is when customers choose a product by ranking their options from best to the worst using an objective measurement, like price or quality. Horizontal differentiation Horizontal differentiation is when customers choose between products subjectively, because they have no objective measurement to distinguish between best or worst.
Mixed differentiation Customers making more complex purchases tend to use a mix of vertical and horizontal differentiation when making purchase decisions. Advantages of product differentiation Communicating the distinct features and benefits of your product is the secret to successful marketing.
Building brand loyalty Strong product differentiation makes your business memorable. Achieving higher price points You can increase your profits, sometimes by a significant margin, through product differentiation.
Narrowing down your target audience Product differentiation helps you refine your target audience as well. Investing in your future Building a distinct product or service and finding its place in the market takes a lot of work. Take your business to the next level.
Start Today. This page is now available in other languages. How can a brand provide superior customer support? 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.
However, if the price of both products was the same, one would be considered "the best" because of its perceived quality. For example, a Hanes T-shirt vs. The customer chooses a product or brand according to personal preference, for example, Coca-Cola or Pepsi. Mixed differentiation is complex and involves factors of both vertical and horizontal differentiation.
For example, a consumer may choose a new car from the same class of vehicle and consider the price points of the different brands vertical differentiation but also the colors of the interior horizontal differentiation. Product differentiation is important because it allows different brands or companies to gain a competitive advantage in the market.
If differentiation were unachievable, the bigger companies with economies of scale would always dominate the market because they can undercut smaller producers in terms of price. Product differentiation is also a way to control costs for the consumer by maintaining a competitive market. Apple differentiates its products by pricing them higher than its competitors implying that the products are better quality and incorporate the latest technology. The company also stimulates consumer interest by introducing hype before product launches through clever marketing and distribution strategies.
Product differentiation is a way for products and brands to command market share based on consumer preferences. Customers choose products for various reasons whether it be price, brand image, quality or durability, taste, color, or a temporary trend.
If a product can differentiate itself from its competitors in some unique way and appeal to consumers, it will have a competitive advantage and gain market share. Therefore, product differentiation is also a way for market forces to do their work and keep prices down for the consumer. Marketing Essentials. Company Profiles.
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Business Marketing Essentials. What Is Product Differentiation? Key Takeaways Product differentiation depends on consumers' attention to one or more key benefits of a product or brand that make it a better choice than similar products or brands. Positioning your product or service is an example of this communication. If you know that competitors will have more features because they have more money , great positioning takes the focus off the features of the product and is the best way to separate yourself from the competition.
Most early stage companies focus on the development of a great product or service but overlook the importance of positioning, and true positioning takes great vision and thought — not just more Facebook likes or Twitter followers. Did New York City need Starbucks when it launched? Probably not — there was already great coffee in NYC. But Starbucks positioned itself as a special place.
Positioning is sometimes even more important than product in a crowded marketplace. It all starts with telling a unique story, one that your competitors are not currently telling. They have expanded their product offerings from just email marketing to now offering Google re-marketing, Facebook ads and business analytics.
They promote their products to a very wide audience and for that matter, they might not focus as much time and development on their core audience which was always small businesses who need effective email marketing.
Even though they might have seen great opportunities with the other products, there are a lot of MailChimp alternatives that are popping up and are honing in on a specific audience and building features that audience love.
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