What is product differentiation

Definition of Product Differentiation

Product differentiation is a term that refers to how a company differentiates a service or product from others available in the same category of products.

This strategy tries to assist organizations in developing a competitive edge and defining compelling, unique selling propositions (USPs) that differentiate their product from rivals. Furthermore, firms with several goods in their portfolio may utilize differentiation to distinguish their products from one another and avoid cannibalization.

This article will offer an overview of product differentiation and answers to some frequently asked concerns regarding the process.



Importance of Product Differentiation

Identifying how your product is distinctively superior to another is more vital than ever in today’s more competitive global environment.

While in the past, Consumers used to be restricted to the selections available in their local supermarket or high street store; however, there is now a variety of purchasing opportunities available online. Your company can purchase them on any day or night if they like.

However, the reality is that most customers are sluggish. They want to blindly pick and choose from among the hundreds of similar products offered for purchase in a single transaction. Indeed, one could argue that there is currently an excessive amount of choice available, with customers suffering from option overload across a wide range of industries.

As a result, a focused product differentiation strategy creates a powerful marketing hook. Customer decision-making is made much more swiftly and readily if you can instinctively assist them in understanding why they would benefit from your goods over that of another brand.

This is also true on the other side of the coin. If good product differentiation aids your firm in understanding the distinct value that it provides to consumers, any items you introduce without a defined differentiation strategy may struggle to achieve momentum with customers.


Benefits of Product Differentiation

What does your good or brand do/achieve/provide that your competitors do not? Product differentiation assists your business in answering this issue and focusing on the distinct value that a product offers to its users. If no effort is made to develop a differentiation strategy, products risk blending in with a sea of rivals and never gaining the market share required to stay in business.


Examples of Product Differentiation

Consider the brand’s Sprite and 7-up. These two drinks are nearly identical in flavor and purchased at a similar price. So what is it about one (Sprite) that regularly outsells the other? The same is said for nearly every industry, from automobiles to cell phones, fashion to financial products. Sometimes the costs are the same, as in the case of 7-up and Sprite, and other times they are drastically different, as in the case of fox jeans and Renta jeans.

So, what is it about similar products that make them stand out from one another in the marketplace? What is it about a product that makes it ‘better’ than its competitors, and how does it achieve this distinction? And why should a buyer choose one of these over the other one?

Product differentiation is the key to finding a solution.

Through product differentiation, consumers can make sense of their purchasing options. A “unique selling proposition” is the point of differentiation that a product offers (USPs). The unique selling proposition (USP) is celebrated, and it is frequently the focal point of how a product is sold.


Who is in charge of product diversification, and how do they do it?

Because it is uncommon for a corporation to have a particular function dedicated to product differentiation, it can be challenging to determine who is ultimately responsible.

Marketing assumes responsibility for how a product or brand is communicated through its marketing mix. It is frequently left to them to determine precisely which unique selling propositions (USPs) to promote.

However, the situation is not relatively as straightforward as that.

As a result, product differentiation can and should come from any part of your organization. You can use any product feature to distinguish it from another, so product differentiation is a multi-stakeholder issue.

Team in charge of the product

A product team will be responsible for the product and will work toward achieving a defined product vision (as outlined in the product roadmap).

As a result of consumer insights and user research, the product team will likely understand the distinctive elements that genuinely resonate with end customers, which helps them develop a product vision.


Team in Charge of Marketing

A visual brand language is frequently the most crucial point of differentiation for many organizations. Indeed, Sprite consistently outperforms 7–year after year because its brand is just more substantial than that of its competitor.

However, the marketing team can differentiate its product from a competitor by utilizing branding to connect with a different demographic. Sprite and 7-UP, on the other hand, are both going after a comparable, mass-market target population.


Team for Support and Success

Customer service is an essential component of your product offering. Furthermore, it provides an opportunity to outperform your competitors.

For example, it may provide:

●     A game-changing reward or loyalty program.

●     A long-term service guarantee.

●     A comprehensive return policy.

●     Any other post-purchase support that competitors do not offer.

These prospects for added value are yet another example of how a company can separate itself from the competition.

Different sorts of product differentiation. In general, product diversification can be classified into one of three categories:

●     Differentiation on a horizontal plane

Horizontal differentiation is used to describe the same products and cannot be distinguished by differences in quality or price. Consumers will choose one product over another depending on their unique preferences and requirements. Examples are large-scale consumables, such as soft drinks, detergents, and food items.

●     Differentiation on the vertical axis

The price point heavily influences the vertical distinction. Although a product may perform essentially the same functions, the user experience can be significantly different due to price surcharges. Fashion, vehicles, and airlines are examples of industries where prices for clothes, automobiles, and travel vary substantially depending on the company that sells the product in question.

●     Differentiation on a mixed basis

Mixed differentiation describes items that lie midway between vertical and horizontal differentiation. The locations and proximity of hotels, for example, vary, as do the amenities, services, and levels of comfort available. In making purchasing decisions, both pricing and personal preferences are considered.

The Components of Product Differentiation


There are no restrictions on how or where your product can distinguish itself in the market; however, some of the most popular areas of differentiation are as follows:

Specifications and Functioning

Do you have a unique selling point that no other firm can match? In addition, what about the best-performing feature that everyone wants, such as the highest-quality camera on a mobile phone?

Dependability and Long-term Durability

Is it possible that your product will be regarded as the most dependable? Is your product or service going to last longer than the competition? Can you claim that you are the most reliable service provider?

Aesthetics and Practical Application

How does your design or user experience fare compared to your competition? Is it more pleasing to the eye, touch, feel, or navigate?


Do you have the most competitive pricing on the market? If not, what do you have to give that is more valuable as a substitute?

Factors Related to the Environment

Will my purchase from you make a difference in making the world or society a better place? Are your suppliers sourced ethically? Do you consider yourself to be carbon neutral? Will you make donations to environmental organizations or take steps to reduce your carbon footprint? As we can see, how a business or product distinguishes itself can be rather diverse. An in-depth understanding of your market, user insights, and broader business objectives will contribute to how your particular organization achieves a competitive advantage.


The Process for Creating a Product Differentiation Strategy

Are you ready to start concentrating on product differentiation but do not know where to begin? Here are a few steps to help you get started.

Understand your market. Take notice of the need for whom your product is intended. Who are the rival groups, and what services do they provide? What kinds of critical consumer demands aren’t being satisfied by existing options?

Work with your whole team to identify methods to differentiate your product from others on the market potential. Take stock of the advantages and values your product provides to customers and determine the importance of those values.

Identify other ways to set the product apart from the competition. Then, consider where they could fit in your organization’s strategic plan.


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