PRODUCT DIFFERENTIATION AND MARKET SEGMENTATION AS ALTERNATIVE MARKETING STRATEGIES WENDELL R. SMITH
Alderson & Sessions decade the 1930's, the work of D URING theRobinsonofand ofChamberlin resulted in a revitalization economic theory. While classical and neoclassical theory provided a useful framework for economic analysis, the theories of perfect competition and pure monopoly had become inadequate as explanations of the contemporary business scene. The theory of perfect competition assumes homogeneity among the components of both the demand and supply sides of the market, but diversity or heterogeneity had come to be the rule rather than the exception. This analysis reviews major marketing strategy alternatives that are available to planners and merchandisers of products in an environment characterized by imperfect competition. Diversity in Supply That there is a lack of homogeneity or close similarity among the items offered to the market by individual manufacturers of various products is obvious in any variety store, department store, or shopping center. In many cases the impact of this diversity is amplified by advertising and promotional activities. Today's advertising and promotion tends to emphasize appeals to selective rather than primary buying motives and to point out the distinctive or differentiating features of the advertiser's product or service offer. The presence of differences in the sales offers made by competing suppliers produces a diversity in supply that is inconsistent with the assumptions of earlier theory. The reasons for the presence of diversity in specific markets are many and include the following: 1. Variations in the production equipment and methods or processes used by different manufacturers of products designed for the same or similar uses. 2. Specialized or superior resources enjoyed by favorably situated manufacfacturers. 3. Unequal progress among competitors in design, development, and improvement of products. 4. The inability of manufacturers in some industries to eliminate product variations even through the application of quality control techniques. 5. Variations in producers' estimates of the nature of market demand with reference to such matters as price sensitivity, color, material, or package size. Because of these and other factors, both planned and uncontrollable differences exist in the products of an industry. As a result, sellers make different appeals in support of their marketing efforts. Diversity or Variations in Consumer Dem,and Under present-day conditions of imperfect competition, marketing managers are generally responsible for selecting the over-all marketing strategy or combination of strategies best suited to a firm's
THE JOURNAL OF MARKETING requirements at any particular point in time. The strategy selected may consist of a program designed to bring about the convergence of individual market demands for a variety of products upon a single or limited offering to the market. This is often accomplished by the achievement of product differentiation through advertising and promotion. In this way, variations in the demands of individual consumers are minimized or brought into line by means of effective use of appealing product claims designed to make a satisfactory volume of demand converge upon the product or product line being promoted. This strategy was once believed to be essential as the marketing counterpart to standardization and mass production in manufacturing because of the rigidities imposed by production cost considerations. In some cases, however, the marketer may determine that it is better to accept divergent demand as a market characteristic and to adjust product lines and marketing strategy accordingly. This implies ability to merchandise to a heterogeneous market by emphasizing the precision with which a firm's products can satisfy the requirements of one or more distinguishable market segments. The strategy of product differentiation here gives...
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