(c) Alteration of Existing Products: Instead of developing a new product, the management should take a fresh look at the company’s existing products. Very often improving an established product can be more profitable than introducing a new one. The alterations may be introduced in the colour, design, packaging, etc.
(d) Positioning the Product:
Positioning is an attempt to distinguish the particular product from its competitors along real dimensions in order to be the preferred product for certain market segments. Positioning aims to help customers to know the real differences between competing products so that they can match themselves and thereby satisfy their needs best.
(e) Trading Up and Trading Down: Trading up refers to the adding of higher priced and more prestigious products to their existing line in the hope of increasing the sales of existing low priced products. Trading down refers to the adding of lower priced item to its lines of prestigious products in the hope that people who cannot afford the original products will want to buy the new one, because it carries some of the status of the higher priced product.
(f) Product Differentiation: Products are assumed to be homogeneous under perfect competition. Today the markets are no more perfect. We live in a world of monopolistic competition where there are competing monopolies. Here products are similar but not identical. Products are close substitutes for one another. For instance, in the case of toothpaste there are several brands such as Colgate, Signal, Binaca, Forhans, Close-up, etc.
The purpose of product differentiation is to make their goods look superior. It is this product heterogeneity which provides monopoly power to the firm.
E.H. Chamberlin has mentioned two types of differentiation: (i) Differentiation based upon the characteristics of the product itself. This includes real and imaginary differences.
(a) Real differences—Materials used, design and workmanship.
(b) Imaginary differences—Advertising, packaging and brand names.
(ii) Differentiation based upon the conditions surrounding the sale of the product. They are convenience of location of the shop, courtesy, reputation for fair dealing, etc.
Porter identifies ‘differentiation’ as one of the three generic strategies a firm can adopt to secure its competitive advantage in an industry. The other two are ‘cost leadership’ and ‘focus’. According to Porter, “Differentiation provides insulation against competitive rivalry because of brand loyalty by customers and resulting lower sensitivity to price”.
