Differentiated marketing

Entering a grocery store, you’ll see that the same product from a company can have different sizes and packages. Coca-cola, for example, is wrapped up in a can, a plastic, or a glass bottle. The package size also varies, from 330-ml aluminum cans to 1-liter bottles. Do you know why this is the case? If you say that is "to meet the diverse needs of customers", you are absolutely right. Offering various product types and variants is how many companies cater to a large customer base and maximize their sales potential. This process is also known as differentiated marketing. Let's explore what differentiated marketing is and how it differs from other marketing techniques.

Definition of Differentiated Marketing

Differentiated marketing is a strategy where a company creates marketing campaigns to appeal to different groups of customers. In simpler terms, it's like crafting unique commercials that resonate with different audiences.

In differentiated marketing, companies develop a unique offering for each customer segment. They also use a variety of marketing strategies and channels to reach different types of audiences.

The contrast of differentiated marketing is undifferentiated marketing, where companies apply the same marketing technique and channel for all customer groups.

Differentiated Marketing Strategy

Customers' needs and preferences can vary significantly, making a differentiated marketing strategy essential for businesses to cater to these diverse requirements. Take cosmetics shoppers as an example: some may prioritize functionality, while others seek organic or vegan options. By segmenting the target audience into smaller groups and tailoring marketing campaigns to each, companies can leverage a differentiated marketing strategy for optimal results.

To successfully implement a differentiated marketing strategy, marketers should follow five key steps:

1. Define the market
2. Research the market
3. Segment the market
4. Choose marketing channels
5. Develop marketing strategies

Differentiated marketing focuses on understanding customers' unique desires and unmet needs in the market. Market research is a crucial first step in this process, with both primary and secondary research methods providing valuable customer insights.

Segmenting the market based on these insights allows marketers to tailor offerings more effectively and streamline their efforts. By targeting specific groups interested in their products or services, businesses can optimize their marketing strategies.

Selecting appropriate marketing channels is also vital for a successful differentiated marketing strategy. Utilizing multiple channels based on the target audience's preferences can significantly enhance promotional effectiveness.

A differentiated marketing strategy incorporates the four components of the Marketing Mix 4Ps - price, product, promotion, and place. By adapting these elements to each customer segment, businesses can create tailored marketing strategies that resonate with their target audiences.

Differentiated Marketing Examples

Differentiated marketing examples can be found in various industries as companies strive to cater to their target audiences' diverse preferences and needs. Here are three more examples illustrating how businesses employ differentiated marketing strategies:

McDonald's

This fast-food giant employs a differentiated marketing strategy to appeal to various customer segments. McDonald's offers salads and grilled chicken options for health-conscious customers, while those seeking indulgence can enjoy their classic burgers and fries. The company also targets children with Happy Meals, which include toys and smaller portions. Marketing channels for McDonald's vary, with younger customers being reached through digital ads and social media, while older demographics may be targeted through traditional media like TV commercials.

Nike

A renowned sportswear brand, Nike utilizes differentiated marketing strategies to cater to diverse customer needs. They offer products for various sports, such as running, basketball, and soccer, as well as for different age groups and skill levels. Nike also collaborates with celebrities and athletes for product endorsements, appealing to fans and aspiring athletes. Their marketing channels include social media, digital ads, and collaborations with sports teams and events.

Coca-Cola

Companies with a mass audience, like Coca-Cola, must pay a large sum for advertising. It is necessary to ensure their survival on the market. However, along with mass marketing, Coca-Cola also adopts a differentiated marketing strategy to widen and diversify its audience.

Looking into Coca-Cola’s demographic profile, you will see that the company separates its market based on age, family size, and income. Each group is targeted with different marketing strategies:

• For the age group 10-35, they use celebrities to promote the product and target places where young people occupy such as universities, schools, colleges, etc.

• The older groups (40+) are advertised low-sugar options such as Diet Coke or Coke Zero. Marketing channels are mostly traditional such as TV commercials.

• Coca-Cola products also come in different sizes and packages (cans, plastic bottles, glasses, 330-ml cans, 0.5-liter bottles, 1.5-liter bottles, etc). There is something for everyone. Whether you are an adult or a child, earn a high or low income, or live alone or with a family, a Coke is matching your needs.¹

Fig. 1. Coca-Cola bottles and cans

Differentiated marketing allows Coca-Cola to promote itself more effectively. By dividing the market into segments, the company can cater to the specific needs of each group and achieve higher revenues overall.

By analyzing these differentiated marketing examples, it's evident that businesses can broaden and diversify their customer base by tailoring marketing strategies to cater to specific audience segments. This approach allows companies to effectively communicate their value proposition and build a strong brand identity across various customer groups.

Differentiated Marketing vs. Undifferentiated Marketing

Having learned about differentiated marketing, you might wonder about its counterpart — undifferentiated marketing.

Before talking about their differences, let’s see what they have in common.

So, like differentiated marketing, the goal of undifferentiated marketing is to reach an audience and provide them with a relevant offer.

The main difference is that while undifferentiated marketing targets the mass market (as many people as possible), differentiated marketing divides the market into two or more segments and advertises to them specifically.

Here’s a more in-depth comparison table:

Table 1. Differentiated marketing vs Undifferentiated marketing, StudySmarter Originals

Differentiated Marketing Advantages and Disadvantages

Differentiated marketing is far from unique in the marketing world. Though it has clear advantages over other marketing strategies.

Advantages of differentiated marketing

Here are the main advantages of differentiated marketing:

Diverse customer base

Looking into the profile of differentiated marketing companies, you'll see that their customers differ in age, gender, location, and income levels. The diverse customer base allows the company to earn money from multiple streams while extending its product portfolio to meet the needs of each group.

Offering the right product to the right people

By segmenting the market, companies can understand their customers better and develop more suitable offerings. For example, Coca-Cola packaging comes in different sizes and materials (cans, bottles, small and large sizes) - whether you live alone or with a family, you can find something to suit your need.

Scale up more effectively

A business can start with a specific customer group rather than expanding it by studying the behavior and needs of other customer groups. For example, your company may start by selling primarily to students. As the business grows, you can begin catering to other groups like office workers and industry professionals.

Develop brand loyalty

By personalizing the offers, you have a higher chance of achieving customer satisfaction. This is the foundation for developing brand loyalty.

Increase sales revenue and profit

with multiple product types and variants you can meet the needs of more people and increase sales revenue. The presence on various marketing channels can improve your brand awareness and extend your customer base.

Extend business lifetime

Since differentiated marketing comes with two or more segments, you can switch to another segment when one is no longer viable.

Disadvantages of differentiated marketing

That said, different marketing is not perfect. Here are two main disadvantages of differentiated marketing:

Higher costs of advertising

Differentiated marketing require you to market your product on more than one channel. This might incur higher advertising expenses. There is also more effort in developing different marketing campaigns for different audiences.

Low standardization

Differentiated marketing reduces the standardization of the marketing process. Since you cannot adopt the same marketing strategy for another customer group, it takes more time and effort to develop new strategies. Also, the customer feedback may be different, which poses a challenge when implementing changes.