Question

Are differentiation and substitutability the same thing? Who decides over the degree of product differentiation? And how could a business find out (research) to determine the degree of differentiation of its product(s)?

Answer 1

Are differentiation and substitutability the same thing?

Ans: No, they aren't same. Differentiation also known as Product Differentiation is the process of distinguishing a product or service from others to make it more alluring to a particular target market. Example, Any additional features being offered on top of the product becomes a plus point for the customer. The best example for differentiation based on features is Mobile phones, handsets or any technology product. They are separated fundamentally by the quantity of customizations or the extra highlights that they offer.

Whereas, Substitutability refers to the ability of goods or services to be replaced by another good or service in use or consumption.Both the items or administrations help the client in satisfying their needs. The client can fulfill their needs using either of the two products or services.

Who decides over the degree of product differentiation?

Ans: The degree of product differentiation as registered in the strength of buyer preferences ranges from slight to fairly large, tending to be greatest among infrequently purchased consumer goods and “prestige goods,” particularly those purchased as gifts.

And how could a business find out (research) to determine the degree of differentiation of its product(s)?

Ans: They can differentiate their product by size,by origin and by branding,They can differentiate their product by packaging and by adding a simple feature or ingredient to their product which is not found in any other company, They can also differentiate their product by exposing the weaknesses of other competiive brands.