Product differentiation

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Product differentiation is a tactic employed by companies to set their goods apart from similar market offerings. This strategy focuses on establishing a unique selling point or emphasizing particular characteristics that render the product superior or distinct from its rivals. The primary forms of product differentiation are vertical, horizontal, and other variations like spatial differentiation. Vertical differentiation pertains to variations in quality and price, which consumers can objectively assess. Conversely, horizontal differentiation is subjective, relating to individual tastes, such as color or taste. Spatial differentiation utilizes geographical location as a distinguishing factor. This strategy can result in a competitive edge, augmented profits, enhanced consumer value, and market segmentation. Nevertheless, it can also influence pricing and demand[1], particularly when substitute goods are available.

Terms definitions
1. demand. Demand, a fundamental term in economics, denotes the volume of a particular good or service that buyers are prepared and capable of buying at varied prices within a specified timeframe. The price of the product, the expense of associated goods, disposable income, personal likes and dislikes, and anticipations about future costs and accessibility significantly influence it. A demand curve graphically illustrates the correlation between demand and its determinants. This notion also encompasses various forms of goods demand such as negative demand and latent demand, and strategies for their effective management. The elasticity of demand, a vital element, gauges the demand's responsiveness to price fluctuations. Finally, the structure of the market can significantly affect the demand encountered by individual companies.

In 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.

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