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Differentiated marketing

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 that allows a company to serve multiple market segments. It involves dividing one big market into two or more segments and promoting to them separately. For this reason, differentiated marketing is also called multi-segment marketing.

Differentiated marketing is a marketing strategy that involves dividing the target audience into two or more segments.

A good example of differentiated marketing is a fashion store that targets multiple audiences: students who shop on a budget, working adults with a steady income, and high-class customers. All these customer groups differ in age, needs, and willingness to pay (maximum price someone is willing to pay for a product). To cater to these diverse needs, companies have to adopt different marketing methods, a.k.a. differentiated marketing.

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 of Undifferentiated marketing.

Differentiated Marketing Strategy

Customers vary widely in needs and preferences. Take cosmetics shoppers for example. Some would buy anything that does the job. Some would prefer organic products. Others would only go for vegan options. To cater to these diverse needs, companies have to divide the target audience into smaller groups and market to them separately. This is the basis of a differentiated marketing strategy.

Effective differentiated marketing can help companies:

  • Reach a wider audience

  • Generate more sales

  • Achieve customer diversification

  • Build strong brand identity.

To successfully execute 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 means understanding what customers truly want. It requires marketers to explore a need that has not been fulfilled in the market and develop a product to fulfill that need. This is why market research is the first and most important step in developing a marketing strategy.

Both primary and secondary research can be used to gather customer data. During research, marketers should pay special attention to customers' preferences, desires, unmet needs, or challenges.

Learn about different marketing research techniques in our explanation Market Research.

After identifying customer needs and wants, the next step is to divide the market into segments. Segmentation can helps marketers understand the customers more deeply and develop offerings matching their needs. It also reduces marketing efforts as targeting a small group who is interested in what you are selling is much easier than targeting the masses.

Learn more in our explanation of Market segmentation.

After market research and segmentation, the development of a marketing strategy begins. For differentiated marketing, your main task is to decide on which marketing channels and strategies to use. A perk of using differentiated marketing is that you have plenty of choices when it comes to selecting marketing channels. In fact, it is more effective to promote your products on multi-channels than just one as your audience shows up in different places.

Here are some examples of differentiated marketing channels:

By age

  • Young people - reach by social media, online communities

  • Older groups - TV commercials, newspapers, magazines

By type

  • Sports enthusiasts - sports events, clubs, etc.

  • Students - school, university

  • Vegans - blogs, influencers

By location

  • Locals - leaflets, pops-up in universities

  • International - social media, website, digital ads

A differentiated marketing strategy is made up of four components: price, product, promotion, and place. If you recognize this as the Marketing Mix 4Ps, you are right. A differentiated marketing strategy is the same as any marketing strategy, only instead of having one marketing mix, you can have multiple depending on the customer type. You'll see how this works in the example below.

Differentiated Marketing Examples

To see differentiated marketing in practice, let’s take a look at Coca-Cola’s differentiated marketing example:

Companies with a mass audience like Coca-Cola have to pay a large sum of money 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, there’s a Coke 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.

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.

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.

  • Offer 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.

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

Differentiated marketing means dividing the market into two or more segments and promoting specifically to them.

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

A differentiated marketing strategy comes with many advantages such: 

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

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

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. 

Final Differentiated marketing Quiz

Question

Differentiated marketing is sometimes called _________.

Show answer

Answer

multi-segment marketing

Show question

Question

Differentiated marketing involves ____________. 

Show answer

Answer

dividing the market into two or more segments.

Show question

Question

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

Show answer

Answer

True

Show question

Question

Differentiated marketing uses the same marketing strategy and channel for every campaign.

Show answer

Answer

True

Show question

Question

To cater to these different needs, companies have to divide their target audience into smaller groups and market specifically to them. This is the idea of ___________.

Show answer

Answer

Differentiated marketing

Show question

Question

Give two reasons why companies adopt differentiated marketing. 

Show answer

Answer

Possible answers: 


  • Reach a wider audience

  • Generate more sales

  • Achieve customer diversification 

  • Build a strong brand identity

Show question

Question

What are the steps in developing a differentiated marketing campaign?

Show answer

Answer

  1. Define the market

  2. Research the market

  3. Segment the market

  4. Choose marketing channels

  5. Develop marketing strategies 

Show question

Question

Market research is not important in differentiated marketing. 

Show answer

Answer

True

Show question

Question

Targeting a small customer group interested in your product or service is much easier and cheaper than targeting a broad audience.

Show answer

Answer

True

Show question

Question

Differentiated marketing uses ______ channel(s) to reach a diverse customer base. 

Show answer

Answer

Multiple

Show question

Question

Undifferentiated marketing targets the _________, differentiated marketing targets ___________. 

Show answer

Answer

  • mass market
  • two or more specific market

Show question

Question

One benefit of differentiated marketing is that it allows companies to resonate with different customer groups. 

Show answer

Answer

True

Show question

Question

One drawback of differentiated marketing is that it can incur high costs of __________.

Show answer

Answer

(customized) advertising

Show question

Question

Differentiated marketing reduces the _________ of the marketing process.

Show answer

Answer

standardization

Show question

Question

A differentiated marketing strategy allows companies to _________ their audience while increasing sales and customer loyalty. 

Show answer

Answer

widen and diversify

Show question

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