Product Differentiation and Consumer Demand in Local Industrial Goods Market

Anchal Yadav

doi:10.70528/IJLRP.v2.i8.2119

Product Differentiation and Consumer Demand in Local Industrial Goods Market

Author(s)	Anchal Yadav
Country	India
Abstract	The current research analyzes the influence of differentiation in shaping the demands of the buyers for industrial products at the local market level. The traditional understanding assumes that industrial goods are commodities competing with each other on the basis of price and standardization, whereas, based on the theory of Porter, Lancaster, and transactional cost economics, the paper provides a multidimensional concept of differentiation in industrial procurement. In particular, this approach is defined by three types of differentiation, such as technical, spatial, and relational differentiation, which are manifested in the quality and reliability of the goods, geographical closeness and the speed of their delivery, as well as in the relationship between buyers and suppliers. The locality in the industrial procurement is viewed as an attribute of value, providing a potential Local Premium to industrial procurement. On an empirical basis, the research suggests using a quantitative method that is based on procurement data, industrial surveys, and secondary market data using discrete choice and hedonic price models. Such an approach allows for estimating how certain characteristics of the product or supplier influence the likelihood of purchases and the willingness to pay. At the same time, robustness analysis should ensure that there is no endogeneity and selection bias in the model. In terms of the expected results, one can expect that, in addition to the high technical qualities of the products manufactured by industrial enterprises, the geographical proximity allows for creating more stable demand due to lower transaction costs, greater flexibility in providing services, and reliable purchasing. From this perspective, the current study will make significant contributions to the fields of industrial economics, business-to-business marketing, and localization of supply chains.
Keywords	Product Differentiation; Consumer Demand; Industrial Goods Market; Local Industrial Procurement; Technical Differentiation; Spatial Differentiation; Relational Differentiation; Hedonic Pricing Model; Discrete Choice Model; Transaction Cost Economics; Local Premium; Industrial Economics; Supply Chain Localization.
Published In	Volume 2, Issue 8, August 2021
Published On	2021-08-11
DOI	https://doi.org/10.70528/IJLRP.v2.i8.2119
Short DOI	https://doi.org/hbxczx

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Product Differentiation and Consumer Demand in Local Industrial Goods Market

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