An organization that uses a differentiated marketing strategy develops different offers for individual market sectors, rather than a single offer for all sectors. That strategy enables the organization to meet the specific needs of customers in each sector, increasing the chances of marketing success. Organizations can differentiate their offers in a number of ways: by modifying the product, by offering different levels of service, or by offering products through different channels. Although a differentiated strategy may increase sales, it may also require higher marketing costs to reach each sector effectively.
Differentiated marketing meets specific customer needs, rather than attempting to cover all bases. 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. In the consumer market, detergent manufacturers offer many variants of a basic product to meet the needs of consumers who look for different benefits such as cleaning power, value for money, environmental consideration or fabric care.
A differentiated marketing strategy enables organizations to compete effectively in niche sectors where competitors do not have a suitable offering. According to NetMBA, organizations whose offer provides the best fit with the needs of the sector have the greatest profit potential.
Organizations that operate in a number of niche sectors and build strong market share in each can increase overall sales, compared to the sales they would achieve by trying to compete with undifferentiated offers across all sectors, according to the authors of “Contemporary Marketing.”
Differentiated products appeal to retailers and distributors, helping an organization to attract and build a more effective distribution channel. Retailers benefit from dealing with a single supplier, but have access to a range of products that appeal to different groups of consumers.
A differentiated marketing strategy enables an organization to respond quickly to changes in the marketplace without major investment. For example, changing the distribution channel from retail outlets to the Internet enables the organization to meet the needs of customers who prefer the convenience of online shopping. Offering an information technology product with a free home installation service enables an organization to meet the needs of customers who do not feel confident about installing the product themselves.