With the right use of the differentiation method, a company can increase sales despite a large number of direct competitors. Let's consider the advantages that an enterprise receives when implementing this strategy:
reduction in the number of direct competitors (companies selling goods with the same characteristics);
strengthening the company's position in the market (even a small enterprise can become a monopolist for its segment of the target audience);
increasing audience loyalty;
reducing pressure from substitute products;
more flexible pricing (the higher the value of the product, the easier it is to set the price);
distinguishing a product mint database from its competitors (it is difficult for consumers to compare a differentiated product with others).
Benefits of Product Differentiation
To achieve such advantages, the company needs to invest more in the production of differentiated goods. Unusual products require a variety of raw materials in small batches, as well as additional equipment. In addition, promotion costs will increase, since there will be a need to explain the features of the new product to a small group of consumers.
Differentiation can also increase competition within a single company's product range. For example, if a company makes two types of shampoo (say, for oily and for normal hair), one of them will sell more actively than the other. However, if the company wants to increase sales of the lagging product, it will have to sacrifice the indicators of the leading product position.
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Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
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