Given the analogy of a layer cake, product differentiation seeks to secure a layer of the cake, whereas segmentation seeks a wedge. Successful product development requires the utilization of both product differentiation and market segmentation. The former strategy adjusts or bends demand conditions to meet the sellers conditions. The latter represents a more precise adjustment of products and production to market conditions (Weinstein 32).
Market segmentation often results from substantial growth. After markets are developed on some general basis, they reach the point where additional effort tends to yield diminishing returns, and attention is given to specific market segments that become large enough to be attractive. By cultivating specific market segments, companies seek to make use of a greater opportunity to maximize customer satisfactions. This maximization, in turn, results in the development of a more secure market position and posture. As products are designed to serve the needs of individual customers, they assume a special character and increase their distinctiveness. The closer the product is to the point of customer purchase, the more differentiated it becomes, and less flexibility is available to the manufacturer. For some products, the demand of an individual customer may be unique, and the product takes on rigidity (Weinstein 76).
For instance, Adidas segments its market for sport professionals and non-professionals, women, men and children. Where possible, manufacturers would like to reduce risks by postponing differentiation as long as possible, and only incurring changes in form and product identity at the latest possible point in the flow of marketing. Because of this, particular attention is given to a discussion of new products, their adoption and diffusion processes, the product life cycle, and new-product failures. There are other significant demographic factors that affect consumption patterns. For example, if