Differentiated marketing: what it is and what it is for [mini-guide]

Differentiated or segmented marketing is defined as such because its strategy aims to cover different markets with multiple products. Segmenting the market means dividing it into single units, (targeted), these units will be brought together according to certain variables into social and economic groups, called precisely “segments”.

It becomes essential to proceed with the analysis of different markets or demographic segments, being able to satisfy market niches can indeed be a highly profitable business strategy. Differentiated marketing can be a winning strategy, especially in light of the competitive dynamics that characterize the current era.

It is, therefore, useful to understand its characteristics and what differentiates it from other strategies such as undifferentiated marketing, concentrated marketing, and niche marketing. In this mini-guide, in addition to some hints on the segmentation process, some examples of differentiated marketing will also be provided.

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Differentiated marketing: why is it important to make the right choice?

To better explain differentiated marketing, it is necessary to recall some fundamental basic concepts of traditional marketing.

With the evolution of global markets and the advent of the Internet, a transformation has taken place in consumer behavior, they are increasingly aware, informed, fickle, and unfaithful. For companies that have to compete in the age of social media, this means an extra effort in achieving their business goals.

It’s not easy to measure yourself in context in which, in addition to digitization, time has also become a competitive factor, you have to move before and better than your competitors. This is why, consistent with the business model chosen by a company, it is essential to develop a differentiated marketing strategy.

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Differentiated marketing: product distinction

According to the US economist Michael Porter, a company can obtain a competitive advantage by acting on costs or on differentiation. The expression “competitive advantage” refers to the mix of variables that allow the company to win over the competition.

  • Based on the logic of differentiation (which is different from differentiated marketing), a company chooses to stand out when it manages to be unique in producing goods or services compared to its competitors. Consequently, the ability to be able to meet the needs of its customers in an unparalleled way is usually compensated with a pricing policy characterized by higher prices.
  • Alternatively, you can choose to act on costs, i.e. becoming the lowest-cost producer or supplier within its sector (and, obviously, in this case, the lower cost will correspond to a lower price).

From a marketing point of view, especially in a period like this (marked by high turbulence and intense price competition), it is not always easy to be able to differentiate one’s own products/services from those of the opponents.

Diversifying your offer, in fact, means being able to achieve that degree of quality, novelty, and originality that allows customers to perceive the added value and to choose.

This distinction is relevant to one successful marketing strategy: in fact, as long as consumers fail to grasp the distinctive value of the product/service offered by a company compared to its competitors, competition will be played out exclusively on price.

Marketing and segmentation

In traditional marketing, segmentation (read more here) is the process by which the market is broken down into individual units (called targets) which are subsequently aggregated into socio-economic groups (called segments) based on some variables.

The segmentation phases perform the function of identifying which goods or services are best offered, in which market, and to which categories of users. From this point of view, the ways of product differentiation are according to the different types of customers and their competitors. In particular:

  • In the first phase, the market is divided into individuals (that is, into single people or into complex units such as, for example, a couple, a family, or a company).
  • In the second phase, the targets are reassembled on the basis of some variables.
  • In the third stage, we proceed to form the segments.
  • In the fourth stage, the segments are identified and further defined.

As regards market segmentation criteria, they can be of different types and, more precisely:

  • Geographical: when referring to a precise territorial area.
  • Socio-demographic: when it comes to parameters such as age, gender, income, level of education, family members, etc.
  • Psychographic: in this case, we refer to factors such as lifestyle or social class.
  • Behavioral: when segmentation takes place on the basis of behavior (for example, the tendency to seek quality or, alternatively, price or the propensity to brand loyalty, to inquire before buying, and so on).

Definition of the market and types of marketing

Depending on what will be proposed and the categories of consumers towards which it intends to direct, a company can choose between different types and marketing strategies. Each typology corresponds to the specific model pursued.

In essence, once the choice of the group (or groups) of users to address has been made, the company can adopt different approaches:

  • he can choose to address the market as if it were homogeneous: in this case, he will implement an undifferentiated marketing strategy.
  • may choose to address the segmented market, in its (almost) entirety: in this case, the implemented strategy is differentiated marketing.
  • can choose to address only some specific segments of the market: in this case, we are dealing with concentrated marketing.

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Difference between differentiated and undifferentiated marketing

The difference that characterizes differentiated marketing from undifferentiated marketing is easily intuitive right from the definition. Let’s see specifically the respective characteristics, advantages, and disadvantages of the two marketing methods.

Undifferentiated marketing

Based on this model, one chooses to address a market as if it were a homogeneous entity. For a company, this means setting up a marketing program aimed at attracting as many consumers as possible.

A strategy of this type is usually realized when the proposed products or services they are not differentiated, that is, they do not have characteristics such as being perceived as special or better by buyers.

These are generally goods or services that are widely available and differ slightly from those offered by any competitors. The range of products is reduced to a minimum and customization options are not contemplated. The company is focused on production and tends to pay little attention to the target and the customer.

This one-size-fits-all marketing approach is frequent in the expansion phases of nascent markets, or in markets where the position held is characterized by the absence of competitors significant.

In these conditions, there is no need to identify a target, nor to invest particular resources in customer management, but efforts tend to be concentrated on large-scale production in order to satisfy market demand and prevent the entry of new competitors.

The promotion is done through advertising messages of a generic type, to be directed towards all potential customers in such a way as to be attractive to as many people as possible. The advantages of this model, since communication is generalized, are linked to lower production and marketing management costs.

The disadvantages are evident in that the company has no way of dealing with business risk (this occurs because it has concentrated its efforts on a product/service that is substantially indistinguishable from that of the competition and in doing so it has turned to all consumers).

Another disadvantage is the risk that a mass product, undifferentiated, can be preferred to that of another competitor that has entered the market and has chosen to introduce elements of differentiation of its product/service.

This eventuality is not all that rare in a current context, in which imitation has taken on a creative value and a positive connotation (that is, it is no longer perceived as mere plagiarism, provided that the object presents improving or innovative characteristics with respect to the well imitated).

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Differentiated marketing

When opting for the differentiated marketing strategy(or segment, or with multiple segmentation), the market is instead seen as a heterogeneous entity, made up of many homogeneous segments. In essence, it is assumed that there are many groups of potential customers each of which must be offered more diversified products or services. In other words, the offer is adapted to the needs of the individual segments.

Compared to the undifferentiated marketing strategy, with differentiated marketing the range of products/services offered is richer and postulates ample customization possibilities. The marketing mix is therefore specifically designed for product, price, distribution, and promotion characteristics in such a way as to satisfy the specific segment it is aimed at.

The goal of the differentiated marketing strategy is to penetrate deeply into a more limited market while at the same time conquering a larger share. This type of approach is typical of small or medium-sized companies that have limited resources which, in order to compete effectively on the market, choose to focus on a few segments whose tastes and behaviors are well known.

Benefits of Differentiated Marketing

The advantages of this model are the high ability to perfect the product/service achieved by the company, in such a way as to be more appreciated by customers and more easily maintain the relative market shares. At the promotion level, different messages are created to be addressed to each audience.

Each piece of content is specifically designed to best represent the benefits and advantages that each segment expects to achieve by purchasing the good or using the service.

Disadvantages of Differentiated Marketing

Among the disadvantages of using differentiated marketing are costs. The company, in fact, while managing to achieve higher sales volumes, must incur higher costs both in terms of design, production, management of products/services and in terms of advertising communication (which, as we have seen, is differentiated in relation to each type of consumer).

This can prove problematic, especially for a small business that must carefully rationalize its resources. Furthermore, an excessive diversification of the goods or services offered risks making one perceive one diluted brand identity thus causing confusion among the users.

Examples of differentiated marketing

On a more general level, among the companies that follow this model, some car manufacturers, in developing their own promotional strategy, have accentuated, for each type, the characteristics more in line with the tastes and expectations of the target audience.

For example, in addressing potential customers who are more sensitive to environmental and safety issues, they have placed an emphasis on the reliability of the brand and on the profuse commitment to pursuing objectives related to energy saving and environmental sustainability.

On the contrary, to intercept consumers who are more attentive to fashion and performance, they have opted for a message and product characteristics aimed at favoring the identification of the good with a particularly coveted status.

In any case, the most interesting examples are found in the tourism sector, a sector in which web marketing has been more successful. Following the diffusion of the internet, in fact, there has been a real revolution which has allowed users (travelers, tourists, hikers) not only to find out more in-depth and easily about the destinations to reach but has also made it possible to book and actually design customized packages.

Furthermore, the aspect of the user experience is particularly relevant and cannot be overlooked. On the business side, the need to adopt an effective digital strategy and communication has thus emerged to respond adequately to the new demands of tourists-travelers-consumers.

That’s why in the travel sector there is an increasingly marked trend towards differentiation and personalization of the offer. As already mentioned, the choice to customize, if properly made, avoids the inconvenience of having to compete (and be chosen) only on the basis of price.

In this field, in fact, the current competitive dynamics translate into an ever wider range of tourism products and the need to respond to global demand. Therefore, being able to compete in terms of quality is of paramount importance.

In terms of differentiation, a hotel company or a carrier could therefore act in different directions:

  • differentiating its services (for example, proposing the provision of meals in the room, the screening of films during the flight or, again, offering a reservation system that allows the traveler to choose a seat in advance, and more);
  • or it is also possible to differentiate for the personnel. In this case, the human resources are trained and selected in order to represent, in a given location, a unicum, qualitatively relevant compared to the competition;
  • differentiate in terms of image (offering, i.e. a particularly strong, distinctive, and representative image);
  • differentiate on the basis of location (for example, a hotel overlooking the beach enjoys an undisputed competitive advantage over a competitor hotel further from the coast).

In terms of differentiated marketing, on the other hand, personalization generally translates into an offer or treatment tailored to a particular category of customers. As is well known, travelers are not all the same but, on the contrary, each of them has specific tastes and needs which cannot be satisfied with an undifferentiated approach.

The customer today wants to be pampered and wants to feel unique. This is why various accommodation businesses have tried to respond by offering personalized experiences and implementing a specific promotional activity for each type of user (business travelers, families, groups).

By way of example, it will therefore be more convenient for a professional who travels for work or a conference tourist to offer services that allow him to work effectively and comfortably even when he is in a hotel (in this case, for example, the need to provide a wi-fi connection becomes essential). -fi efficient).

On the contrary, it will be more appropriate for those who travel for pleasure to provide targeted information and services that make their stay more pleasant and varied.

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Focused marketing

Even in the case of concentrated marketing (as in the case of differentiated marketing) the market is assumed to be segmentable. In this hypothesis, however, the strategy is no longer concentrated on individual segments (as occurs in the case of differentiated marketing), but on only one, to which only one product/service is offered.

In other words, the company, by choosing to concentrate solely on a particular segment, has the possibility of specializing and refining itself in the production and promotion of that particular good or service.

As far as the advantages of this choice are concerned, the high degree of specialization and knowledge of the category of users to which it is addressed can facilitate the achievement of a prominent position within the market and, correlatively, this allows the company to be positively perceived by consumers. Advertising-related costs will also be contained, as promotion efforts are concentrated on a single segment.

Among the disadvantages, there is the high business risk (which is not fragmented into the different types of goods or services aimed at distinct market segments). Transport companies represent the typical example of concentrated marketing.

Niche marketing

Similarly, in the hypothesis of niche marketing (like differentiated and concentrated marketing), the market is considered as segmentable. In this case, however, the attention is directed to a single (sub)segment to which a remarkably diversified and “customizable” product is offered compared to the competitors’ proposals (and this is a characteristic that distinguishes it from differentiated marketing).

Usually, the target segment is very small or, precisely, “niche”. Above all, companies tend to resort to this strategy which is the first to enter that market sector (so-called first comers) or companies that produce luxury goods and which possess a high level of specialization and know-how on the product is able to discourage the entry of other competitors within the same segment.

As can be easily understood, the advantages that emerge from choosing this model are linked to the ability to gratify the users of the niche and therefore to the opportunities for consolidating one’s position. The disadvantages of this approach are of an economic nature because, in the medium term, the entry of other companies with greater financial possibilities can compromise the important position acquired.

More marketing strategies together

In conclusion, however, the use of one tactic does not necessarily exclude the others. In fact, some companies resort to more marketing techniques. For example, they use the primary brand to reach the mass market (with a differentiated marketing strategy) and use the secondary brand for the various more specific segments (in this case, adopting a differentiated marketing strategy).

Similarly, a restaurant could use the first strategy to promote an event aimed at attracting all the inhabitants of a certain area and use the second to offer differentiated menus that attract specific types of customers (e.g. vegetarians, coeliacs, families, and students).

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