Final answer:
Estée Lauder and Chanel's strategy in targeting the upscale cosmetics segment is a focus strategy that utilizes product differentiation to create a distinct market presence and cater to niche customer needs.
Step-by-step explanation:
Estée Lauder, Chanel, and other upscale cosmetics marketers exemplify a specific target market strategy known as the focus strategy. In employing this strategy, they cater to the prestige segment of the market, directing their efforts toward a narrow audience to fulfill their specific needs and preferences.
By doing so, these brands use product differentiation to distinguish themselves from competitors. This differentiation can be achieved through various means, such as the physical aspects of the product, the location from which it is sold, the intangible aspects of the product, and the perception of the product. Differentiated products are those that stand out in one or more of these ways.
Product differentiation is essential in the cosmetics industry because economies of scale are typically small relative to market demand, meaning that significant cost advantages are not easily achieved by simply expanding production. Instead, companies like Estée Lauder and Chanel have built up well-respected brand names over many years, focusing on quality, exclusivity, and brand image rather than competing primarily on price.
This strategic focus on a defined, upscale segment is contrasted with a cost leadership strategy, which revolves around becoming the lowest-cost producer in industry and does not align with the approach of prestige brands.