Product Differentiation vs. Price Discrimination: An OverviewProduct differentiation and price discrimination are two strategies used in marketing and economics. Product differentiation is the process used to distinguish one company's goods and services from another company's goods and services. Show
Conversely, price discrimination is a strategy used to distinguish prices for the same goods and services. Key Takeaways
Product DifferentiationProduct differentiation seeks to distinguish a product from a competing product to make it more attractive to a specific target market. Three types of product differentiation are horizontal, vertical, and simple. Horizontal product differentiation distinguishes a product based on one characteristic of the product; however, consumers are not able to distinguish which product has a higher quality. Vertical product differentiation is also based on one characteristic of a product, but consumers are able to distinguish which product has a higher quality. Simple product differentiation is based on distinguishing a product on a numerous amount of characteristics. For example, a company can differentiate its product by packaging it better. Suppose a soda company packages its soda in a new ergonomic bottle, while another soda company packages its soda in a plain aluminum can. There is very little differentiation in the soda itself, but the products are differentiated by the containers. While product differentiation is used across the board, price discrimination tends to be more common in certain industries, such as travel, pharmaceuticals, textbooks, food and beverage, and entertainment. Price DiscriminationPrice discrimination occurs when the same goods and services are sold at different prices from the same company. Unlike product differentiation, price discrimination focuses on charging different customers different prices for the same goods. Contrary to product differentiation, price discrimination does not focus on distinguishing its product from others. For example, a company that offers a student discount is considered price discrimination. Generally, students may not have the money to buy products and are more sensitive to price changes, so businesses try to attract more of that target market by making items cheaper. Another example might be a hotel chain that charges one rate in New York and another in Portland, for the same size room and same accommodations. Still another would be an airline that sells two seats across the aisle from each other, but one is $50 less because it was discounted the week before the flight. (For related reading, see "Three Degrees of Price Discrimination") Suggest a new Definition Proposed definitions will be considered for inclusion in the Economictimes.com Marketing
Definition: The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix - Price, Product, Promotion and Place. However, nowadays, the marketing mix increasingly includes several other Ps like Packaging, Positioning, People and even Politics as vital mix elements. Description: What are the 4Ps of marketing? Price: refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the market to pay, supply - demand and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied in with an overall business plan. Pricing can also be used a demarcation, to differentiate and enhance the image of a product. Product: refers to the item actually being sold. The product must deliver a minimum level of performance; otherwise even the best work on the other elements of the marketing mix won't do any good. Place: refers to the point of sale. In every industry, catching the eye of the consumer and making it easy for her to buy it is the main aim of a good distribution or 'place' strategy. Retailers pay a premium for the right location. In fact, the mantra of a successful retail business is 'location, location, location'. Promotion: this refers to all the activities undertaken to make the product or service known to the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, direct marketing, contests and prizes. What is the importance of the marketing mix? All the elements of the marketing mix influence each other. They make up the business plan for a company and handled right, can give it great success. But handled wrong and the business could take years to recover. The marketing mix needs a lot of understanding, market research and consultation with several people, from users to trade to manufacturing and several others. How does Marketing Mix help your business? Watch video...
Related NewsIs price the most important element of the marketing mix?Pricing is one of the most critical elements of a product in the marketing mix. Companies have to pay money to design a product, to develop/build a product, and to promote a product. However, a product's price is the only element in the marketing mix which generates an income for an organization.
Why is it said that price is the only element in the marketing mix that produces revenue?Price is the only element in the marketing mix that produces revenue; all other elements present costs. Price is also one of the most flexible marketing mix elements. Unlike product features and channel commitments, prices can be changed quickly.
What is the price in marketing mix?2. Price. Price is the amount that consumers will be willing to pay for a product. Marketers must link the price to the product's real and perceived value, while also considering supply costs, seasonal discounts, competitors' prices, and retail markup.
What is the importance of pricing in marketing mix?The price of a product online determines how much margin that product will make, a portion of which can be used for marketing. If the product has high margins, marketers have more money to market a product. However, if a product has lower margins, there is less money for a marketing strategy.
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Unlike product, promotion, or place, price is the only part of the marketing mix:
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