Product Differentiation, often known as just Differentiation, is the process of distinguishing a product from others already in the market, especially the competition. The aim is to make it more appealing to the target market at the same time. Product Differentiation is about highlighting the ways in which a product is different from another, in order to create that sense of value. The areas of differentiation include quality, price, functions, design, characteristics, advertising and availability.
Product Diversification is the modification of a product or service to reach a more expansive target market. Unlike Product Differentiation, this isn't about highlighting anything; rather it is about finding a new section of the market to attract. This bid to lure new consumers in is usually done by using pre-existing brands, or in some cases creating a new brand. The downside to Product Diversification is that any poor reputation or failures will also associate themselves with the original brand. Alternatively, the brand could be so successful it could dwarf the other brand and make it seem unattractive.
In terms of differentiation versus diversification, it is often less risky to differentiate. This is because it's an amendment on a pre-existing and an already established product or service, so there is the guarantee that it's going to have interest. With diversification there is the risk of too little interest or too much interest, and with the too little interest possibility that could mean a loss of capital. Businesses do like to diversify though, because market presence, brand and stature are everything.
Product Diversification is the modification of a product or service to reach a more expansive target market. Unlike Product Differentiation, this isn't about highlighting anything; rather it is about finding a new section of the market to attract. This bid to lure new consumers in is usually done by using pre-existing brands, or in some cases creating a new brand. The downside to Product Diversification is that any poor reputation or failures will also associate themselves with the original brand. Alternatively, the brand could be so successful it could dwarf the other brand and make it seem unattractive.
In terms of differentiation versus diversification, it is often less risky to differentiate. This is because it's an amendment on a pre-existing and an already established product or service, so there is the guarantee that it's going to have interest. With diversification there is the risk of too little interest or too much interest, and with the too little interest possibility that could mean a loss of capital. Businesses do like to diversify though, because market presence, brand and stature are everything.
