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Product differentiation^[1] is a marketing strategy^[3] that businesses use to distinguish their products from similar offerings in the market. This approach involves creating a unique selling proposition or highlighting specific traits that make the product superior or different from its competitors. There are three main types of product differentiation: vertical, horizontal, and other types like spatial differentiation. Vertical differentiation refers to differences in quality and price, objectively measured by consumers. Horizontal differentiation, on the other hand, is subjective and related to personal preferences, such as color or flavor. Spatial differentiation considers geographical location as a differentiator. This strategy can lead to a competitive advantage^[2], higher profits, increased consumer^[5] value, and market segmentation^[4]. However, it can also impact pricing and demand^[6], especially in the presence of substitute goods.

Terms definitions

1. ↑ Product differentiation ( Product differentiation )

1 Product differentiation is a marketing strategy that businesses use to distinguish their products from similar offerings in the market. This approach involves creating a unique selling proposition or highlighting specific traits that make the product superior or different from its competitors. There are three main types of product differentiation: vertical, horizontal, and other types like spatial differentiation. Vertical differentiation refers to differences in quality and price, objectively measured by consumers. Horizontal differentiation, on the other hand, is subjective and related to personal preferences, such as color or flavor. Spatial differentiation considers geographical location as a differentiator. This strategy can lead to a competitive advantage, higher profits, increased consumer value, and market segmentation. However, it can also impact pricing and demand, especially in the presence of substitute goods.

2 Product differentiation is a marketing strategy that businesses use to distinguish their products from similar offerings in the market. This approach involves creating a unique selling proposition or highlighting specific traits that make the product superior or different from its competitors. There are three main types of product differentiation: vertical, horizontal, and other types like spatial differentiation. Vertical differentiation refers to differences in quality and price, objectively measured by consumers. Horizontal differentiation, on the other hand, is subjective and related to personal preferences, such as color or flavor. Spatial differentiation considers geographical location as a differentiator. This strategy can lead to a competitive advantage, higher profits, increased consumer value, and market segmentation. However, it can also impact pricing and demand, especially in the presence of substitute goods.

2. ↑ competitive advantage. Competitive Advantage is a key business concept that refers to the unique ability of a company to outperform its industry rivals. It is achieved through various strategies identified by Michael Porter, a foremost authority in strategic management. These include cost leadership, differentiation, and focus. Cost leadership involves the production of goods or services at a lower cost, granting higher profit margins. Differentiation, on the other hand, entails offering unique products or services that stand out in the market. Lastly, the focus strategy targets specific market segments to optimize resource utilization. Factors internal to a company, such as positioning, corporate identity, and core competencies, also contribute to competitive advantage. However, advantages can sometimes be classified as unfair if they grant benefits to a business that are not accessible to others, hence disrupting market fairness. Government bodies often intervene in such cases to maintain fair market dynamics. Furthermore, the resource-based view of a firm and its capacity for innovation are other key determinants of competitive advantage.

6. ↑ demand.

1 "Demand" is a foundational concept in the field of economics that refers to the quantity of a specific good or service that consumers are willing and able to purchase at different price points within a given period. It is largely influenced by the price of the commodity, the cost of related goods, personal disposable income, individual tastes and preferences, and consumer expectations about future prices and availability. The relationship between demand and its influencing factors is visually represented by a demand curve on a graph. The concept also extends to different types of goods demand, including negative demand and latent demand, and how these can be managed strategically. The elasticity of demand, another crucial aspect, measures the sensitivity of demand to price changes. Lastly, the market structure can notably impact the demand faced by individual firms.

2 "Demand" is an economic term that refers to the amount of a product or service that consumers are willing and able to buy at a certain price. This concept is influenced by various factors such as the price of the commodity, the price of related goods, personal disposable income, tastes and preferences, and consumer expectations about future prices or income. Demand is often represented graphically through a demand curve which shows the relationship between price and quantity. The concept of price elasticity of demand measures the sensitivity of the quantity demanded to price changes. Market structures and types of goods also influence the shape of the demand curve and the nature of demand. Additionally, demand management strategies are used to control economic demand to avoid recession. Understanding demand is crucial for both businesses and policy makers as it plays a vital role in economic forecasting, pricing decisions, and planning production.

3 "Demand" is a foundational concept in the field of economics that refers to the quantity of a specific good or service that consumers are willing and able to purchase at different price points within a given period. It is largely influenced by the price of the commodity, the cost of related goods, personal disposable income, individual tastes and preferences, and consumer expectations about future prices and availability. The relationship between demand and its influencing factors is visually represented by a demand curve on a graph. The concept also extends to different types of goods demand, including negative demand and latent demand, and how these can be managed strategically. The elasticity of demand, another crucial aspect, measures the sensitivity of demand to price changes. Lastly, the market structure can notably impact the demand faced by individual firms.

Glossary: Product differentiation

Product differentiation (Wikipedia)

At economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as from a firm's other products. The concept was proposed by Edward Chamberlin in his 1933 book, The Theory of Monopolistic Competition.

Alternative Meanings:

Product differentiation
Product differentiation is a marketing strategy that businesses use to distinguish their products from similar offerings in the market. This approach involves creating a unique selling proposition or highlighting specific traits that make the product superior or different from its competitors. There are three main types of product differentiation: vertical, horizontal, and other types like spatial differentiation. Vertical differentiation refers to differences in quality and price, objectively measured by consumers. Horizontal differentiation, on the other hand, is subjective and related to personal preferences, such as color or flavor. Spatial differentiation considers geographical location as a differentiator. This strategy can lead to a competitive advantage, higher profits, increased consumer value, and market segmentation. However, it can also impact pricing and demand, especially in the presence of substitute goods.

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