Research Insights 6.1 Product Differentiation and Market Segmentation

Marketing Segmentation and Positioning

Source: Smith, W. R. (1956), ‘Product differentiation and market segmentation as alternative marketing strategies’, Journal of Marketing, July, 3–8.

Abstract: The article presents marketing strategies for businesses operating under conditions of imperfect competition. Reasons for variations of supply are primarily: equipment, production methods, market research, manufacturing resources and differences in quality control. The article states the purpose of some marketing campaigns is to bring a convergence of consumers' preferences towards the promotion of a single product. In some cases, product differentiation within a company is undesirable. An explanation of product diversity and its causational factors is provided. The need for marketers to recognize market segmentation and diverging demand are expressed. The need for managing total costs with respect to the combined management of production and marketing is expressed.

Insight: This seminal article explained the idea that neither supply nor demand was homogeneous (i.e. different groups wanted to produce and consume different things). A product differentiation approach concerns itself with bending demand to the will of supply but the reverse approach also exists, bending supply to the will of demand. This alternative marketing strategy, articulated in detail in this article for the first time, was termed market segmentation.