In marketing, “product differentiation” concept is used to distinguish the products or services from the others in order to offer it to a specific target group.
When the differentiation is lower, the product resemble to the other ones that the consumers can easily find in the market. As the features of the products do not differ, you can compete with your rivals by decreasing the price.
But if you can successfuly achieve differentiating your product, it will be easier to sell it with a higher price. It means, when you add new features to the product you are trying to sell, it will probably capture the attention of some consumers who are willing to reach those features that they cannot find in others. So, they will be eager to pay an extra amount of money to buy your product.
Domain names have an important difference from other products. That is, domain names have a very specific feature. If you are selling a property, your target customers will be in a very wide range. However, your domain name will only targets people who intend to create a website related to that domain name. The fact that target customers are such a small group will also make the sale much more difficult.
Because of its own nature, a domain name is a product with a very high level of product differentiation. So that we do not need to make an extra effort to differentiate it. It is unique, like a work of art.
The high level of product differentiation of domain names reduces the sell-through rate (STR), the rate that shows us how much of the total products we have converted into sales in a calendar year.
However, it should not be forgotten that this also offers an advantage for domain name sellers. That is, we have the opportunity to price the domain names higher. Because a single letter change can create a price difference of millions of dollars between two domain names.
