Your business has to use unique messaging and campaigns for each segment, and the required resources can add up fast. Positioning Statement Versus Value Proposition. Most businesses find the need to identify niche markets with customers that are most likely to buy their products. 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. Balance your thinking about servicing specific types of customers with an awareness that you need to find new customers. Other firms may out differentiate the existing firms by introducing better unique products into the market. Kokemuller has additional professional experience in marketing, retail and small business. Just because a target group is well-defined does not necessarily mean that is the right group to aim for. Be prepared to change your strategy if you find a target market is not responding they way you predicted it would. Evaluate Competitors Methodically. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance. How Is Competitive Advantage Used in Focus Strategy? 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. You can use information regarding geographical, demographic and other characteristics of your customers to create products to identify very specific customer needs and wants. What Are the Functions of Strategic Management? Your market's customers have a variety of needs and preferences. This contrasts with a more universal, mass market approach, in which the same product is offered to the total audience and different benefits are emphasized to attract each customer group. Product Segmentation, Advantages and Disadvantages of Product Differentiation, Privacy Notice/Your California Privacy Rights. He holds a Master of Business Administration from Iowa State University. Designing specific product offerings and then customizing marketing to each customer group is an expensive endeavor. A small business usually cannot afford to market to everybody. 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. In fact, some struggle with copycat products or knock-offs that undercut the market. Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. A small business usually cannot afford to market to everybody. In turn, using differentiated marketing, you can create and market products to satisfy the needs of two or more market segments. Weigh the advantages of exploiting a specific market against the disadvantages of spreading your advertising dollars too thin. Advantages: Separate mix can be developed for each segment, different markets can be easily identified. One concern with differentiated marketing is that you might be wrong about who your customer is. Decide if you want a series of niche markets or want to break out into the general market at some point in your growth. 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." A differentiation strategy doesn't necessarily guarantee that consumers will find the value that … Also called Multi-segment Marketing or Segmented Marketing. Will consumers find value in the unique features your product provides? As a product remains in the market for longer consumers become smarter about the prices and thus the premium charges being charged can no longer be sustained. Differentiated marketing to small groups of customers may have limits. Disadvantages of differentiated marketing. The Disadvantages of Differentiated Marketing. Disadvantages of Product Differentiation 1. He has been a college marketing professor since 2004. In addition, customers may be willing to pay a higher price for a product that meets the majority of their needs than for a product that meets only a few needs. 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. The Advantages of Differentiated Marketing. What Is Global Standardization in Marketing? 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. Understanding the needs of particular customers enables your company to design a marketing offer that appeals to those customers. As a result, your marketing program may avoid costly mistakes and be more effective in increasing sales revenues. In addition, you won't be eligible for discount advertising rates if you must place your ads in a wide variety of outlets. 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 a Narrow Perspective of Marketing? All rights reserved. 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. Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. Common marketing wisdom also suggests that a business should tailor its message to each group it targets. The advantages and disadvantages of marketing via radio or television will clearly be considerably different to those of print. If you understand how existing and potential customers perceive your competitors and their products, you will be able to identify overlooked opportunities. Companies that use differentiated marketing typically emphasize product quality and service as key value propositions. Differentiated marketing will require some different processes as well to establish that kind of marketing strategy. 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. In turn, customers will choose your products if those products best meet their needs, which will increase their product satisfaction and your profits. Differentiate Customer Groups. By differentiating customers based on specific needs, you are able to select customers you want to serve based on your company's capabilities. You research a market to clarify the specific needs of individual customers and utilize those needs to differentiate individual customer groups within the market from others. You may have to choose between marketing to the smallest group possible or marketing to the largest group possible. As a result, you achieve a competitive advantage by offering products that best serve a selection of potential customers within the market. Using a differentiated marketing strategy, you choose groups of customers you believe you can best serve based on your company's capabilities.

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