290:. What really matters is the relationship between consumers' willingness to pay for improvements in quality and the increase in cost per unit that comes with such improvements. Therefore, the perceived difference in quality is different among different consumers, so it is objective. For example, a green product might have a lower or zero negative effect on the environment; however, it may turn out to be inferior to other products in other aspects. Hence, the product's appeal also depends on the way it is advertised and the social pressure felt by a potential consumer. Even one vertical differentiation can be a decisive factor in purchasing.
363:(direct effect). On the other hand, banks become closer substitutes (indirect effect). First, banks become closer substitutes as the impact of linear transportation costs decreases. Second, deposit rate competition is affected by the size of the quality difference. These two effects, "stealing" depositors versus "substitutability" between banks, determines the equilibrium. For low and high values of the ratio quality difference to transportation rate, only one bank offers remote access (specialization). Intermediate (very low) values of the ratio quality difference to transportation costs yield universal (no) remote access.
335:
consumers gain greater value from a product, however this leads to increased demand and market segmentation which can cause anti-competitive effects on price. From this perspective greater diversity leads to more choices which means each individual can purchase a product better suited to themselves, the negative to this is prices within the market segment tend to rise. The level of differentiation between goods can also affect demand. For example within grocery stores, If a category of goods is relatively nondifferentiated then a high amount of assortment depth leads to less sales.
367:
horizontal dominance. This occurs when the transportation cost prevail over the quality of service, deposit rate and time. Second, vertical dominance comes into picture when the bank that is not offering remote access gets the entire market for depositors who have lowest preference for remote access. That is when the quality service, deposit rate and time prevails over the cost of transportation.
299:
the user's preference. A restaurant may price all of its desserts at the same price and lets the consumer freely choose its preferences since all the alternatives cost the same. A clear example of
Horizontal Product Differentiation can be seen when comparing Coca Cola and Pepsi: if priced the same then individuals will differentiate between the two based purely on their own taste preference.
85:
264:(1980) proposed that differentiation is any product (tangible or intangible) perceived as “being unique” by at least one set of customers. Hence, it depends on customers' perception of the extent of product differentiation. Even until 1999, the consequences of these concepts were not well understood. In fact, Miller (1986) proposed marketing and
244:; however, this is an over-simplification. If customers value the firm's offer, they will be less sensitive to aspects of competing offers; price may not be one of these aspects. Differentiation makes customers in a given segment have a lower sensitivity to other features (non-price) of the product.
325:
agreement between them. Firms operating in a market of low product differentiation might not coordinate with others, which increases the incentive to cheat the collusion agreement. If a firm slightly lowers there prices, they can capture a large fraction of the market and obtain short term profits if
307:
Whilst
Product differentiation is typically broken into two types Vertical and Horizontal, it's important to note that all products exhibit a combination of both and they are not the only way to define differentiation. Another way to differentiate a product is through spatial differentiation. Spatial
298:
Horizontal differentiation seeks to affect an individual's subjective decision-making, that is the difference cannot be measured in an objective way. For example, different color versions of the same iPhone or MacBook. A lemon ice cream is not superior to a chocolate ice cream, is completely based on
316:
According to research conducted by combining mathematics and economics, decisions of pricing depend on the substitutability between products, the level of substitutability varies as the degree of differentiation between firms’ products change. A firm cannot charge a higher price if products are good
268:
as two differentiation strategies, which was supported by some scholars like Lee and Miller (1999). Mintzberg (1988) proposed more specific but broad categories: quality, design, support, image, price, and undifferentiated products, which received support from Kotha and
Vadlamani (1995). However, IO
366:
This competition is a two factor game: one is of offering of remote access and the other is of deposit rates. Hypothetically, there will be two consequential scenarios if only one bank offers remote access. First, the bank gains a positive market share for all types of remote access, giving rise to
358:
Horizontal differentiation occurs with the location of bank's branch. Vertical differentiation, in this example, occurs whenever one bank offers remote access and the other does not. With remote access, it can spur a negative interaction between transportation rate and taste for quality: customers
354:
In this example using the
Hotelling model, one feature is of variety (location) and one feature of quality (remote access). Remote access using bank services via postal and telephonic services like arranging payment facilities and obtaining account information). In this model, banks cannot become
362:
A depositor with a high (low) taste for remote access has low (high) linear transportation costs. Different equilibria emerge as the result of two effects. On the one hand, introducing remote access steals depositors from your competitor because the product specification becomes more appealing
232:
Differentiation primarily affects performance through reducing directness of competition: as the product becomes more different, categorization becomes more difficult and hence draws fewer comparisons with its competition. A successful product differentiation strategy will move a product from
334:
Product differentiation within a given market segment can have both positive and negative affects on the consumer. From the producers perspective building a different product compared to competitors can create a competitive advantage which can result in higher profits. Through differentiation
123:
may result in changing a product in order to improve differentiation, the changes themselves are not differentiation. Marketing or product differentiation is the process of describing the differences between products or services, or the resulting list of differences. This is done in order to
277:
Vertical product differentiation can be measured objectively by a consumer. For example, when comparing two similar products, the quality and price can clearly be identified and ranked by the customer. If both A and B products have the same price to the consumer, then the
173:
or an advertising theme. The physical product need not change, but it may. Differentiation is due to buyers perceiving a difference; hence, causes of differentiation may be functional aspects of the product or service, how it is
259:
competition mentioned the theory of differentiation, which maintained that for available products within the same industry, customers may have different preferences. However, a generic strategy of differentiation popularized by
286:. The major theory in this is that all consumers prefer the higher quality product if two distinct products are offered at the same price. A product can differ in many vertical attributes such as its
321:
price the lower the differentiation. For this reason, firms might jointly raise prices above the equilibrium or competitive level by coordination between themselves. They have a verbal or written
269:
literature (Ethiraj & Zhu, 2008; Makadok, 2010, 2011) did deeper analysis into the theory and explored a clear distinction between the wide use of vertical and horizontal differentiation.
308:
Product
Differentiation is using a geographical location as a way to differentiate. An example of Spatial Differentiation is a firm locally sourcing inputs and producing their product.
659:
Becerra, Manuel; SantalĂł, Juan; Silva, Rosario (23 March 2012). "Being better vs. being different: Differentiation, competition, and pricing strategies in the
Spanish hotel industry".
698:. 76, No. 2, Papers and Proceedings of the Ninety-Eighth Annual Meeting of the American Economic Association (May, 1986), pp. 393-398 (American Economic Association): 393–398.
128:. Marketing textbooks are firm on the point that any differentiation must be valued by buyers (a differentiation attempt that is not perceived does not count). The term
112:
of the market. Thus, differentiation is the process of distinguishing the differences of a product or offering from others, to make it more attractive to a particular
317:
substitutes, conversely as a product deviates from others in the segment producers can begin to charge a higher price. The lower non-cooperative
72:
592:
821:
571:
482:
548:
351:
persuaded banks to compete for deposits on many factors like deposit rates, accessibility and the quality of financial services.
108:
over competitors. Resource endowments allow firms to be different, which reduces competition and makes it possible to reach new
993:
624:
988:
608:
983:
237:
to competing on non-price factors (such as product characteristics, distribution strategy, or promotional variables).
129:
969:
Spring 1997 - Jonathan B. Baker
Director, Bureau of Economics Federal Trade Commission on Product Differentiation
474:
225:
business models, in which businesses market a free and paid version of a given product. Given they target the
436:
218:
175:
89:
93:
842:
386:
199:
144:
105:
921:"On the Interaction Between Vertical and Horizontal Product Differentiation: An Application to Banking"
733:
718:
441:
376:
348:
226:
406:
148:
109:
47:
781:"Analysis of pricing decision for substitutable and complementary products with a common retailer"
947:
939:
892:
875:
814:
integration-Accepted version- 24 July 2017.pdf "Vertical integration and product differentiation"
699:
676:
641:
602:
515:
411:
396:
206:
183:
51:
43:
813:
446:
355:
vertically differentiated without negatively affecting horizontal differentiation between them.
283:
240:
Most people would say that the implication of differentiation is the possibility of charging a
752:
588:
567:
544:
478:
466:
421:
252:
125:
67:
92:
has driven each brand to differentiate its own product from the others to encourage consumer
931:
884:
830:
792:
668:
633:
507:
195:
of buyers regarding the essential characteristics and qualities of goods they are purchasing
178:
and marketed, or who buys it. The major sources of product differentiation are as follows.
63:
17:
855:
765:
287:
152:
426:
318:
261:
339:
Interaction between horizontal and vertical differentiation: an application to banking
221:
that potential customers see as unique. The term is used frequently when dealing with
977:
951:
747:"Essay II: Spatial Product Differentiation. In: Competition in Marketing". DUV. 2006.
645:
563:
536:
519:
241:
113:
101:
55:
920:
834:
680:
622:
Sharp, Byron; Dawes, John (2001). "What is
Differentiation and How Does it Work?".
401:
344:
279:
256:
162:
Horizontal: based on a single characteristic but consumers are not clear on quality
120:
672:
165:
Vertical: based on a single characteristic and consumers are clear on its quality
694:
Sutton, John (May 1986). "Vertical
Product Differentiation: Some Basic Themes".
381:
133:
59:
968:
797:
780:
637:
511:
471:
The Theory of
Monopolistic Competition: A Re-orientation of the Theory of Value
151:, which include the requirement that the products of competing firms should be
84:
498:
Barney, J (March 1991). "Firm resources and sustained competitive advantage".
265:
229:, it is imperative that free and paid versions be effectively differentiated.
391:
322:
192:
170:
140:
35:
31:
888:
587:. Natorp Boulevard, Mason, Ohio 45040: Thomson South-Western. p. 133.
169:
The brand differences are mostly minor; they can be merely a difference in
359:
who have higher taste for remote access face a lower transportation rate.
431:
222:
124:
demonstrate the unique aspects of a firm's product and create a sense of
896:
870:
88:
Aisles in a supermarket. While each item has the same intended purpose,
943:
703:
871:"Product Differentiation, Store Differentiation, and Assortment Depth"
935:
779:
Nandan Giri, Raghu; Kumar Monda, Shyamal; Maiti, Manoranjan (2016).
416:
234:
83:
214:
42:(or simply differentiation) is the process of distinguishing a
785:
Pacific Science Review A: Natural Science and Engineering
585:
Industrial Organization, Contemporary Theory and Practice
583:
Pepall, Lynne; Daniel J. Richards; George Norman (2005).
202:
activities of sellers and, in particular, advertising
186:
which are usually accompanied by differences in price
27:
Process of distinguishing unique products or services
155:. There are three types of product differentiation:
812:Zanchettin, Piercarlo; Mukherjee, Arijit (2015).
822:International Journal of Industrial Organization
282:for each one will be positive, according to the
343:During the 1990s, steps taken by government on
143:, successful product differentiation leads to
869:Stephen, Hamilton; Richards, Timothy (2009).
159:Simple: based on a variety of characteristics
8:
914:
912:
910:
908:
906:
312:Substitute goods and product differentiation
189:Differences in functional features or design
147:and is inconsistent with the conditions for
136:to communicate a product's differentiation.
66:other products. The concept was proposed by
796:
531:
529:
58:. This involves differentiating it from
458:
330:Implications of product differentiation
326:the products are highly substitutable.
104:that enable them to construct specific
851:
840:
761:
750:
600:
303:Other types of product differentiation
73:The Theory of Monopolistic Competition
7:
928:The Journal of Industrial Economics
566:(1961) The Reality of Advertising.
217:of differentiation is to develop a
294:Horizontal product differentiation
25:
273:Vertical product differentiation
625:Journal of Marketing Management
930:. 44, No. 2 (Wiley): 169–172.
835:10.1016/j.ijindorg.2017.07.004
1:
673:10.1016/J.TOURMAN.2012.03.014
233:competing based primarily on
62:' products as well as from a
696:The American Economic Review
543:. Prentice Hall New Jersey.
50:from others to make it more
919:Degryse, Hans (June 1996).
209:(e.g. timing and location).
18:Differentiation (economics)
1010:
798:10.1016/j.psra.2016.09.012
736:. Economics Web Institute.
721:. Economics Web Institute.
638:10.1362/026725701323366809
512:10.1177/014920639101700108
255:’s (1933) seminal work on
130:unique selling proposition
734:"PRODUCT DIFFERENTIATION"
719:"PRODUCT DIFFERENTIATION"
607:: CS1 maint: location (
475:Harvard University Press
227:same group of customers
119:Although research in a
40:product differentiation
994:Management cybernetics
889:10.1287/mnsc.1090.1032
537:Kotler, Keller, Philip
106:competitive advantages
97:
989:Imperfect competition
791:(Elsevier): 190–192.
500:Journal of Management
387:Non-price competition
145:competitive advantage
100:Firms have different
87:
541:Marketing Management
442:Price discrimination
377:Goldilocks principle
349:European integration
407:Market segmentation
153:perfect substitutes
149:perfect competition
102:resource endowments
984:Product management
876:Management Science
732:Piana, Valentino.
717:Piana, Valentino.
661:Tourism Management
467:Chamberlin, Edward
412:Product management
397:Mass customization
98:
70:in his 1933 book,
760:Missing or empty
594:978-0-324-22474-0
422:Country of origin
253:Edward Chamberlin
68:Edward Chamberlin
16:(Redirected from
1001:
956:
955:
925:
916:
901:
900:
883:(8): 1368–1376.
866:
860:
859:
853:
848:
846:
838:
818:
809:
803:
802:
800:
776:
770:
769:
763:
758:
756:
748:
744:
738:
737:
729:
723:
722:
714:
708:
707:
691:
685:
684:
667:(Elsevier): 72.
656:
650:
649:
619:
613:
612:
606:
598:
580:
574:
561:
555:
554:
533:
524:
523:
495:
489:
488:
463:
54:to a particular
21:
1009:
1008:
1004:
1003:
1002:
1000:
999:
998:
974:
973:
965:
960:
959:
936:10.2307/2950644
923:
918:
917:
904:
868:
867:
863:
849:
839:
816:
811:
810:
806:
778:
777:
773:
759:
749:
746:
745:
741:
731:
730:
726:
716:
715:
711:
693:
692:
688:
658:
657:
653:
632:(7–8): 739–59.
621:
620:
616:
599:
595:
582:
581:
577:
562:
558:
551:
535:
534:
527:
497:
496:
492:
485:
465:
464:
460:
455:
447:Hotelling's law
373:
341:
332:
314:
305:
296:
288:operating speed
284:Hotelling model
275:
250:
205:Differences in
182:Differences in
82:
28:
23:
22:
15:
12:
11:
5:
1007:
1005:
997:
996:
991:
986:
976:
975:
972:
971:
964:
963:External links
961:
958:
957:
902:
861:
804:
771:
739:
724:
709:
686:
651:
614:
593:
575:
572:978-0982694145
564:Reeves, Rosser
556:
549:
525:
490:
484:978-0674881259
483:
457:
456:
454:
451:
450:
449:
444:
439:
434:
429:
427:Marketing plan
424:
419:
414:
409:
404:
399:
394:
389:
384:
379:
372:
369:
340:
337:
331:
328:
313:
310:
304:
301:
295:
292:
274:
271:
262:Michael Porter
249:
246:
211:
210:
203:
196:
190:
187:
167:
166:
163:
160:
81:
78:
26:
24:
14:
13:
10:
9:
6:
4:
3:
2:
1006:
995:
992:
990:
987:
985:
982:
981:
979:
970:
967:
966:
962:
953:
949:
945:
941:
937:
933:
929:
922:
915:
913:
911:
909:
907:
903:
898:
894:
890:
886:
882:
878:
877:
872:
865:
862:
857:
844:
836:
832:
828:
824:
823:
815:
808:
805:
799:
794:
790:
786:
782:
775:
772:
767:
754:
743:
740:
735:
728:
725:
720:
713:
710:
705:
701:
697:
690:
687:
682:
678:
674:
670:
666:
662:
655:
652:
647:
643:
639:
635:
631:
627:
626:
618:
615:
610:
604:
596:
590:
586:
579:
576:
573:
569:
565:
560:
557:
552:
550:9780130156846
546:
542:
538:
532:
530:
526:
521:
517:
513:
509:
506:(1): 99–120.
505:
501:
494:
491:
486:
480:
476:
472:
468:
462:
459:
452:
448:
445:
443:
440:
438:
435:
433:
430:
428:
425:
423:
420:
418:
415:
413:
410:
408:
405:
403:
400:
398:
395:
393:
390:
388:
385:
383:
380:
378:
375:
374:
370:
368:
364:
360:
356:
352:
350:
346:
338:
336:
329:
327:
324:
320:
311:
309:
302:
300:
293:
291:
289:
285:
281:
272:
270:
267:
263:
258:
254:
247:
245:
243:
242:price premium
238:
236:
230:
228:
224:
220:
216:
208:
204:
201:
197:
194:
191:
188:
185:
181:
180:
179:
177:
172:
164:
161:
158:
157:
156:
154:
150:
146:
142:
137:
135:
131:
127:
122:
117:
115:
114:target market
111:
107:
103:
95:
91:
86:
79:
77:
75:
74:
69:
65:
61:
57:
56:target market
53:
49:
45:
41:
37:
33:
19:
927:
880:
874:
864:
843:cite journal
826:
820:
807:
788:
784:
774:
742:
727:
712:
695:
689:
664:
660:
654:
629:
623:
617:
584:
578:
559:
540:
503:
499:
493:
470:
461:
402:Configurator
365:
361:
357:
353:
345:deregulation
342:
333:
315:
306:
297:
280:market share
276:
257:monopolistic
251:
239:
231:
212:
207:availability
168:
138:
121:niche market
118:
99:
71:
39:
29:
437:Positioning
382:Crippleware
319:equilibrium
176:distributed
134:advertising
90:competition
60:competitors
978:Categories
852:|url=
762:|url=
453:References
266:innovation
132:refers to
94:preference
52:attractive
952:153324527
829:: 25–57.
646:167346565
603:cite book
520:220588334
392:Marketing
323:collusion
215:objective
200:promotion
193:Ignorance
171:packaging
141:economics
80:Rationale
36:marketing
32:economics
897:40539293
753:cite web
539:(2006).
469:(1962).
432:Freemium
371:See also
223:freemium
219:position
110:segments
944:2950644
854:value (
704:1818803
681:6108921
248:History
184:quality
48:service
44:product
950:
942:
895:
850:Check
702:
679:
644:
591:
570:
547:
518:
481:
198:Sales
64:firm's
948:S2CID
940:JSTOR
924:(PDF)
893:JSTOR
817:(PDF)
700:JSTOR
677:S2CID
642:S2CID
516:S2CID
417:Brand
235:price
126:value
856:help
766:help
609:link
589:ISBN
568:ISBN
545:ISBN
479:ISBN
347:and
213:The
34:and
932:doi
885:doi
831:doi
793:doi
669:doi
634:doi
508:doi
139:In
46:or
30:In
980::
946:.
938:.
926:.
905:^
891:.
881:55
879:.
873:.
847::
845:}}
841:{{
827:55
825:.
819:.
789:18
787:.
783:.
757::
755:}}
751:{{
675:.
665:34
663:.
640:.
630:17
628:.
605:}}
601:{{
528:^
514:.
504:17
502:.
477:.
473:.
116:.
76:.
38:,
954:.
934::
899:.
887::
858:)
837:.
833::
801:.
795::
768:)
764:(
706:.
683:.
671::
648:.
636::
611:)
597:.
553:.
522:.
510::
487:.
96:.
20:)
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
