What is Product differentiation?

Product differentiation is the process of distinguishing the differences of a product or offering from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as one's own product offerings.

Marketing or product differentiation is the process of describing the differences between products or services, or the resulting list of differences. The objective of differentiation is to develop a position that potential customers see as unique.

The term unique selling proposition(USP) refers to advertising to communicate a product's differentiation. 

How to differentiate?

The brand differences are usually minor; they can be merely a difference in packaging or an advertising theme. The major sources of product differentiation are as follows.

  • Differences in quality which are usually accompanied by differences in price
  • Differences in functional features or design
  • Ignorance of buyers regarding the essential characteristics and qualities of goods they are purchasing
  • Sales promotion activities of sellers and, in particular, advertising
  • Differences in availability (e.g. timing and location).

Benefits of Product differentiation

  • As the product becomes more different, categorization becomes more difficult and hence draws fewer comparisons with its competition.
  • A successful product differentiation strategy will move the product from competing based primarily on price to competing on non-price factors (such as product characteristics, distribution strategy, or promotional variables).
  • Customers value the firm's offer, they will be less sensitive to aspects of competing offers; price may not be one of these aspects. 

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