Differentiated Marketing: Advantages, Steps and Example

Updated February 3, 2023

A person seated at a table studies printed graphs and tablet information.

An effective marketing plan can help ensure a business’s success and increase profits. When companies integrate a differentiated marketing strategy, they can appeal to more than one market and offer a range of products or services to fulfill each market’s needs. Understanding the principles of differentiated marketing and its applications can improve your marketing skills and increase revenue.

In this article, we discuss what differentiated marketing is, how it differs from other marketing plans and how you can create a differentiated strategy for your products or services with an example strategy.

What is differentiated marketing?

Differentiated marketing, also known as multisegment marketing, is a strategy aimed at two or more target audiences, demographics or marketing segments. By targeting multiple markets, a company aims to expand its brand and reach to increase revenues and meet customer demands. They typically implement various strategies, such as product offerings, price points or means of product distribution, for each market segment. This allows them to effectively sell products with targeted messages for each audience.

For instance, a health supplement brand may use different marketing strategies to reach seniors, women or children with different vitamin products for each group. It might run TV commercials for older customers and loyalty rewards through social media for parents and younger adults.

Advantages of differentiated marketing

There are several potential advantages for businesses that implement differentiated marketing. For example, differentiated marketing:

Fulfills a range of customer needs

Businesses that use differentiated marketing can fulfill a variety of customer needs rather than appealing to one specific need. For instance, a dietary supplement brand can appeal to customers who need specific nutritional supplements, like vitamin B-12, and children who may need only a general multivitamin. This ability to fulfill diverse needs makes differentiated marketing effective for expanding consumer audiences.

Expands customer reach

Businesses can reach more customers by differentiating approaches to selling their products and services. For instance, a coffee shop can expand its customer base from commuting professionals to college students on a break between classes. Businesses can reach more ideal customers by differentiating their marketing approaches and diversifying offerings. As revenue increases, so does profitability.

Enables adaptation

Differentiated marketing can help businesses adapt to changes within their industries, to product demands and the overall markets to which they appeal. With more than one segment, product type and level of service, businesses can ensure future revenue even if one market becomes no longer viable. A wider demographic and multiple marketing strategies make it easier to follow market trends and maintain a large customer base.

Increases competitive advantage

Along with expanding market niches, differentiated marketing gives businesses an advantage over competitors that market to only one or two select market niches. This can result in companies beating their competition because they can provide a diverse range of products or services that fulfill various needs. Having this competitive advantage can help businesses remain profitable during decreases in the market and demands.

Potential disadvantages of differentiated marketing

Here are some potential disadvantages of using a differentiated marketing strategy:

Increased marketing costs

The more campaigns, or segments, you have, the more the costs go up. Creating and running multiple campaigns usually requires additional channels, such as TV, social media or print ads, along with unique information. The equired resources can add up fast. You should factor in these costs when you look at potential revenue increases from targeting two or more market segments.

Unanticipated limited or negative response

When you market a product or service in more than one way, you may confuse your customer base. For example, a fine dining restaurant that offers kids-eat-free promotions to attract families might lead affluent diners to see the restaurant as a cheap-eats place. In exchange for attempting to entice one group, you might end up losing another group.

Limited business growth

Targeting smaller groups may limit market growth for that product or service. The marketing efforts are geared toward niche markets rather than your overall customer base. When you target only one or two segments of the market, you lose customers in the other market segments. If you gamble on one segment to support your company, you should ensure they stay loyal and not leave you for a competitor who offers a similar product at a lower price, better warranty or return policy or free shipping.

How to create a differentiated marketing strategy

The following steps provide a guide for creating a differentiated marketing strategy to appeal to your customer groups:

1. Narrow your target markets

Start by defining each target market you want to reach. Identify key traits, such as age, location, income bracket and additional demographics, that identify your market groups. For instance, you may separate the customer base into three age segments. Groups may include college-age students, mothers in their 30s and people in their 60s who are ready to retire. The more you can define each market, the better you can develop offerings that meet the unique needs of each group.

2. Analyze the needs of each market

Next, determine the needs your products or services can fulfill for each market. For instance, you can create customer surveys that ask your target markets about products they favor or services that help them achieve something. You can also use analytics to track data related to your customer’s purchasing habits, which can offer clear insight into the products and services your audience regularly buys.

3. Provide offerings for each group

Once you have determined each group’s needs, you can develop your products or services to meet those markets’ needs. For example, you may find that one of your target markets frequently purchases organic cleaning materials. Knowing this, you can develop more natural or organically derived offerings for this group.

4. Identify promotional outlets

Next, determine which promotional outlets will best reach your market groups. For instance, if a target group spends most of its time on social media platforms, you can develop promotional and advertising materials for those platforms. Additionally, when you identify the promotional outlets your markets commonly visit, you can better understand how to design your marketing materials for distribution.

5. Distribute marketing materials

Develop and distribute your advertisements on the platforms used by your target audiences. For instance, you can create social media advertisements, content marketing strategies for blog posts or videos and podcasts to educate your customers on your products or services. When choosing channels for your differentiated marketing strategy, research the primary media and formats for tspecific demographics and markets.

Example of differentiated marketing

The following example illustrates how a business uses differentiated marketing to appeal to more than one customer base:

A restaurant owner uses differentiated marketing to promote their offerings. The owner may define two or more target markets their services appeal to. In this case, they define their target markets as such:

Families and children
College students
Seniors
Singles

After defining who their target markets are, the restaurant owner can then develop a series of offerings that appeal to each niche market:

Families and children: The restaurant offers kids’ meals, combo specials and unique coupons for this specific market.
College students: The restaurant provides weekend specials for $5, which can appeal to students with strict budgets.
Seniors: The restaurant provides early bird specials from 5-7 p.m. for diners over 65 years old.
Singles: One weekend per month, the restaurant hosts “singles night,” where patrons can dine solo or with friends to socialize with others in the dating scene.

Since there are highly defined marketing groups, the restaurant can fulfill multiple segment needs with its services. As the business grows, the restaurant owner can identify additional markets. Additionally, to stay updated on what customers want, the restaurant uses surveys that provide valuable insight into what appeals most to its customers.

How differentiated marketing differs from undifferentiated and concentrated approaches

Differentiated marketing is one of the three main marketing strategies which include undifferentiated, also known as mass marketing, and concentrated marketing. They share the goal of reaching customers, but their approaches differ in several key aspects, including:

Target markets

In differentiated marketing, businesses appeal to two or more well-defined target markets. In concentrated marketing, companies usually appeal to only one well-defined market or sector. With undifferentiated marketing, brands typically promote their products or services to a broad audience without specific parameters that define the market.

Product pricing

Price points for products and services vary under a differentiated marketing plan due to a range of product offerings or service levels for each target market. With concentrated marketing, businesses typically provide a single product or service at the same price. Undifferentiated marketing approaches typically have a single price point for a limited amount of products or range of services.

Product offerings

Products or services that businesses offer typically differ between marketing types. For instance, a business that uses differentiated marketing has a unique selection of products or services to offer each market group. In concentrated marketing, businesses offer one product or service aimed at a select market group. Companies using undifferentiated marketing target limited products or services that can appeal to many types of customers rather than a defined market group.

Distribution

Differentiated marketing relies on multiple promotional outlets, depending on each market group. Concentrated marketing uses the promotional method most preferred by the company’s target market. In undifferentiated marketing, brands typically promote their products through various media outlets without being specific to any market segment.