Product Differentiation - 20

If consumers can see no, or little, difference between your product and another firms, these consumers will be highly price sensitive. (If you raise your price above the existing ''market'' price, you may achieve very low levels of sales.) On the other hand, if consumers see your product as being very different from other producers, you may be able to sell your goods or services ''at a premium''; that is at a higher price than anyone else.

Most producers want to create a sense of ''difference'' between their product and their competitors. In this way, they can increase their share of the market, and they can, potentially, increase their prices with little effect on sales. Over the years, in the fruit and vegetable market, we have seen the rise of ''organic'' vegetable sellers, and firms that sell produce that has had pesticides and herbicides applied to it (although they hardly advertise that!) ''Organic'' firms can sell the humble tomato at a higher price, because of appeals to ''health'' that many consumers are very sensitive too.