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. 

Differentiated marketing Differentiated marketing

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Table of contents

    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.

    Differentiated marketing is a marketing strategy wherein a firm develops distinct marketing campaigns to effectively communicate with diverse customer segments based on their specific needs and preferences.

    Imagine a theme park that designs different advertisements for various groups of visitors. For families with children, they create a campaign showcasing fun rides and attractions for kids. For thrill-seekers, they highlight adrenaline-pumping roller coasters and experiences. Lastly, for couples, they emphasize romantic spots and cozy dining options. By tailoring their marketing efforts to the preferences of each group, the theme park ensures that their ads resonate with every type of guest, attracting a broader range of visitors.

    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.

    A coffee brand can use social media like Instagram and Facebook to attract young people while placing ads in magazines to reach older groups.

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

    Learn more in our explanation: Undifferentiated Marketing.

    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.

    Examples of differentiated marketing channels include:

    • Age: Young people can be reached through social media and online communities, while older groups may respond better to TV commercials, newspapers, and magazines.
    • Type: Sports enthusiasts can be targeted through sports events and clubs, students through schools and universities, and vegans via blogs and influencers.
    • Location: Locals may be engaged through leaflets and university pop-ups, while international audiences can be reached via social media, websites, and digital ads.

    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

    Differentiated marketing Coca-Cola bottles and cans StudySmarterFig. 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.

    Undifferentiated marketing is defined as a marketing strategy to reach the maximum of customers in the market.

    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:

    Differentiated Marketing

    Undifferentiated Marketing

    Purpose

    Achieve audience diversification.

    Reach as large an audience as possible.

    Strategy

    • Use various messages for a sign campaign

    • Employ different channels and strategies

    • Use one marketing mix - product, price, place, promotion - for all marketing campaigns

    Benefit

    Resonate with different customer groups

    Reach many people with a more standardized process

    Characteristics

    Keep improving and adding new features to match customer expectations

    Focus on quality and key features of the product

    Examples

    Products with diverse needs among the audience - food, beverages, etc.

    Products that serve the same need for everyone - toothpaste, shampoo, shower gel, etc.

    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.

    Differentiated marketing advantagesDifferentiated marketing disadvantages

    Diverse customer base

    Higher costs of advertising

    Offering the right product to the right people

    Low standardization

    Scale up more effectively

    Develop brand loyalty

    Increase sales revenue and profit

    Extend business lifetime

    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.

    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:

    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.

    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.

    Differentiated Marketing - Key takeaways

    • Differentiated marketing means dividing the market into two or more segments and promoting specifically to them.
    • A differentiated marketing strategy allows companies to widen and diversify their audience while increasing sales and customer loyalty.
    • The main steps of developing a differentiated marketing campaign are: defining and understanding the target audience, segmenting the market, and developing marketing strategies.
    • Differentiated marketing can use multiple channels to promote to different target groups while undifferentiated marketing only uses one channel for all campaigns.

    References

    1. Julia Anders, Coca-Cola’s Marketing Strategy: An Analysis of Price, Product and Communication, https://www.grin.com/document/232661, 2011.
    Frequently Asked Questions about Differentiated marketing

    What is 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.

    What is a differentiated marketing strategy?

    A differentiated marketing strategy separates the market into different groups and tailors the marketing messages to match their preferences. 

    What are the advantage of differentiated marketing?

    A differentiated marketing strategy comes with many advantages such: 

    • Customer diversification
    • Sales improvement
    • Brand loyalty development
    • More effective scale-up
    • Extended business lifetime

    What are the disadvantages of differentiated marketing?

    The main disadvantages of differentiated marketing are the higher costs of customized advertising and low standardization levels. 

    What is the difference between differentiated and undifferentiated marketing?

    The main difference is that while undifferentiated marketing targets the mass market (as many people as possible), differentiated marketing targets one or several market segments. 

    Why do firms use a differentiated targeting strategy?

    Firms use a differentiated targeting strategy to cater to various customer segments' diverse needs and preferences, ultimately increasing sales and expanding their customer base. 

    How do marketers differentiate products?

    Marketers differentiate products by emphasizing unique features, benefits, or design elements that appeal to specific customer groups. 

    How is niche marketing different from differentiated marketing?

    Niche marketing focuses on a small, specialized market segment with unique needs, while differentiated marketing targets multiple customer segments with tailored offerings for each group.

    How does targeted or differentiated marketing help companies reach markets globally?

    Targeted or differentiated marketing helps companies reach markets globally by enabling them to tailor their products, services, and promotional efforts to suit the preferences, cultural nuances, and specific needs of customers in different countries or regions, thus increasing their appeal and market penetration in diverse international markets.

    Test your knowledge with multiple choice flashcards

    Differentiated marketing is sometimes called _________.

    Differentiated marketing involves ____________. 

    In differentiated marketing, companies develop a unique offering for each segment.

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