Product Differentiation, Competitive Advantage, and Purchasing Power




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Product Differentiation, Competitive Advantage, and Purchasing Power


In the competitive market today, many businesses will tend to provide the same products and services, thus introducing the challenges of making them more preferred within the market base. However, the marketing strategy of product differentiation has become an essential tool to achieve a sense of uniqueness. Through this comprehension, businesses can stand out, and can become increasingly recognized as compared to its competitors. Therefore, a significant research question would be whether product differentiation directly translates to competitive advantage among businesses. Another area of analysis would be whether product differentiation translates to more power to a consumer because of the increased range of choices. There exists a close relationship between product differentiation, competition in the market, and the power of consumers, and by understanding the interconnectivity of these factors, a business can increase its returns while ensuring dominance in its field of operation.


Smith focuses on the importance of diversity in supply as a tool directed towards increasing levels of product differentiation. According to the author, product differentiation is “bending of demand to the will of supply” (64). It provides a form of direction towards which segmentation businesses should select. Similarly, Dirisu, Iyiola, and Ibidunni propose that product differentiation offers an avenue for companies to become competitive within the existing industries (264). Differentiation often takes the direction of demands from consumers, thus increasing their purchasing power.

Choosing various attributes of a product or service will determine the response as well as a section of consumers that businesses will appeal to (James, Rickard, and Rossman 360). According to Phillips and Peterson, there exist agricultural businesses that seek to establish higher quality goods while adding their value (67). The study carried out showed that agrarian firms that engaged in product differentiation as a marketing strategy were typically more successful regarding performance and revenue generation (Phillips and Peterson 71). Additionally, it appealed to a more diversified group of consumers.


Does product differentiation translate to competitive advantage?

            Differentiation plays a significant role in gaining a competitive edge within a company. One of the many ways in which businesses can establish a successful product differentiation is through recognizing the existing shortcomings of similar products within the market and aiming to address them. During the stages of the conception of products, decision-makers need to establish what new aspect of quality will be ascertained that does not exist in similar products in the market. Companies that fail to do this end up with mediocre products that will likely suffer the same fate as that of their competitors (Dirisu et al. 261). Consequently, the implication is that products will struggle not only to gain but also maintain a footing within their respective markets all the while failing to generate high returns.

Product differentiation will provide a business with the power to reinvent the brand image. When consumers see a product that is higher in quality than similar brands in the market, their perception of the brand changes (Smith 65). Additionally, product differentiation also provides a business with the power to recreate a price plan, thereby providing opportunities for higher returns. Consumers will generally be more willing to pay higher prices for products that are of superior quality. They will also be willing to pay higher prices for products that display a form of positive uniqueness when compared to their range of choices in the market.

Does product differentiation translate to increased power to the consumer?

According to James et al., consumer needs determine the path that product differentiation strategies will take (358). Therefore, aside from gaining a competitive edge, businesses aim to respond to needs of consumers. This marketing strategy has been described as having the ability to meet the wants of consumers. In essence, it is a higher priority than the competitive advantage it achieves (James et al. 359). These needs can be represented by the existing shortcomings of products and services that exist within the markets. Additionally, these needs can also be represented by a lack of products that have a potential to be of great use when introduced into the market (Phillips and Peterson 65). Therefore, there is a strong link between product differentiation and an increase in purchasing power for consumers. When businesses establish a differentiation strategy, they are in essence addressing the needs of various segments of consumers in a way that increases buying power (Smith 64).

Evaluation and Conclusion

Product differentiation is a form of marketing strategy where businesses establish a variation of products from their competitors with the aim of appealing to customers and achieving a competitive advantage. The research was aimed at determining the relationship between product differentiation, competitive success, and the ability of consumers to increase their purchasing power. From the resources, it was revealed that differentiation is a strategy that businesses implement to address consumer needs. In this respect, consumers gain power because of an increased selection range. Companies can successfully address consumer needs through targeting specific segments of the market and adjusting to their preferences. Through this, they can gain uniqueness that appeals to consumers in a way that their competitors do not. This strategy has been proven to increase company performance and generate more revenue.

Works Cited

Dirisu, Joy I., Oluwole Iyiola, and O. S. Ibidunni. “Product Differentiation: A Tool of Competitive Advantage and Optimal Organizational Performance (A Study of Unilever Nigeria PLC).” European Scientific Journal, vol. 9, no. 34, 2013, pp. 258-281.

James, Jennifer S., Bradley J. Rickard, and William J. Rossman. “Product Differentiation and Market Segmentation in Applesauce: Using a Choice Experiment to Assess the Value of Organic, Local, and Nutrition Attributes.” Agricultural and Resource Economics Review, vol. 38, no. 3, 2009, pp. 357-370.

Phillips, Jon C., and H. Christopher Peterson. “Product Differentiation and Target Marketing by Agricultural Producers.” Journal of the American Society of Farm Managers and Rural Appraisers, (2004): pp. 64-74.

Smith, Wendell R. “Product Differentiation and Market Segmentation as Alternative Marketing Strategies.” Marketing Management, vol. 4, no. 3, 1995, pp. 63-65.

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