BusinessDictionary: Differentiated Marketing, Ohio State University: Finding Customers -- Market Segmentation, Disadvantage of a Firm That Decides to Follow a Product Specialization Strategy, The Importance of Demographics to Marketing, Price Segmentation Vs. Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. Designing specific product offerings and then customizing marketing to each customer group is an expensive endeavor. If you narrow your focus too far, you may actually be missing potential customers in a group you haven't thought of. He has been a college marketing professor since 2004. Evaluate Competitors Methodically. In turn, you design products with specific characteristics to accommodate the needs of one or more customer groups. A market consists of individual customers who have unique product wants and needs. Also called Multi-segment Marketing or Segmented Marketing. Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. 1. Creating multiple versions or variations of products takes significant research, design and development time and costs much more than creating a single product. Just because a target group is well-defined does not necessarily mean that is the right group to aim for. Meaning Common marketing wisdom also suggests that a business should tailor its message to each group it targets. Oxford University Press: Market Segmentation, Texas Christian University: Segmenting and Targeting Markets, Reference for Business: Market Segmentation, The Disadvantages of Differentiated Marketing, Privacy Notice/Your California Privacy Rights. In turn, customers will choose your products if those products best meet their needs, which will increase their product satisfaction and your profits. A small business usually cannot afford to market to everybody. For example, differentiated marketing might aid a company in establishing a leadership position in the market and increase the profitability of the company's product offering. After doing so, you have to invest heavily in marketing to present distinctive messages that sell each product to the appropriate target customers. More segments mean more ad teams and more ad spend. Billie Nordmeyer works as a consultant advising small businesses and Fortune 500 companies on performance improvement initiatives, as well as SAP software selection and implementation. Apple, which differentiates with its mobile technology and digital music devices, has overcome these challenges by emphasizing cutting-edge technology and innovative leadership as a unifying background theme for all of its products. While differentiated marketing is effective, it has some disadvantages, and you should examine those disadvantages before you initiate a differentiated marketing program. Understanding you customers enables you to design an appropriate promotional campaign and public relations initiatives to improve sales. Most businesses find the need to identify niche markets with customers that are most likely to buy their products. Differentiated marketing meets specific customer needs, rather than attempting to cover all bases. He holds a Master of Business Administration from Iowa State University. Using a differentiated marketing strategy, you choose groups of customers you believe you can best serve based on your company's capabilities. During her career, she has published business and technology-based articles and texts. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." Differentiated marketing has pros and cons relative to a low-cost or mass market approach. Be prepared to change your strategy if you find a target market is not responding they way you predicted it would. In addition, you won't be eligible for discount advertising rates if you must place your ads in a wide variety of outlets. If you design and market too many variations of a product that are similar, you may prevent customers from buying a more expensive product because they can get a "mini" version or lower cost option. Branding is based on instilling positive, specific associations with your brand over time. A huge challenge with differentiated marketing is developing a consistent theme and reputation for your brand. So here’re some ways or steps on how a business can do that. You can only grow so far with a niche market. Kokemuller has additional professional experience in marketing, retail and small business. Advantages: There are many radio and television stations out there. In turn, you can adopt a differentiated strategy and design and market products to meet the needs of particular customer groups, which enables you to achieve a competitive advantage. How Does Product Differentiation Affect Price Elasticity? You may have to choose between marketing to the smallest group possible or marketing to the largest group possible. Research of individual market segments might enable you to create a marketing program that leads to more predictable customer response to your products than would a mass marketing strategy. Will consumers find value in the unique features your product provides? Other firms may out differentiate the existing firms by introducing better unique products into the market. One concern with differentiated marketing is that you might be wrong about who your customer is. Balance your thinking about servicing specific types of customers with an awareness that you need to find new customers. Disadvantages: High marketing costs, message may not reach some customers. Advantages: Separate mix can be developed for each segment, different markets can be easily identified. All rights reserved. Beyond that, you will need to either identify new target markets or find a way to appeal to the broader market. They aren't often the low-cost option in their industries, which means they compete against companies that can offer lower price points. If you change your message every time you advertise to a different group, your business may not have a strong identity. 3. Offering the same software product in two versions – for professional users and for home users – enables the supplier to meet the price and performance needs of each sector with only minor modifications to the core product. Typically creates more sales then Undifferentiated Marketing. Understand the Business Situation- Identify how your business is doing and what the potential opportunities are. The Disadvantages of Differentiated Marketing. Offering products or services that satisfy particular customers' requirements and creating a marketing program that conveys product attributes to customers benefits a company in many ways. Therefore, small businesses frequently attempt to differentiate two or more sets of customers with unique needs which might be met with the company's products or services, from other customers within a market. What Is Global Standardization in Marketing? Your business has to use unique messaging and campaigns for each segment, and the required resources can add up fast. Disadvantages of differentiated marketing. Differentiated marketing could lead to such fragmented messages that you never convey a clear brand image. How to Mix Variables of a Product in Marketing, Unique Selling Points for Marketing Products. How Does Product Differentiation Affect Price Elasticity? A differentiated strategy enables you to select profitable two or more market segments on which to concentrate your efforts. As a result, you achieve a competitive advantage by offering products that best serve a selection of potential customers within the market. This differentiation approach is a more lucrative approach for some companies than a mass marketing approach because the more your product's characteristics meet the needs of your customers, the higher the likelihood that sales volume will increase over time. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance. If each ad you place is so targeted it cannot be reused, or can only be used in certain media outlets, you will incur a lot of expense in creating fresh ads for each group. Revenue increases are not guaranteed.