What Is Product Differentiation? | Definition And Examples

Product Differentiation is a necessary essential in the market which helps us choose the better one from a group of similar looking products. Have you ever been confused between taking any one of the two similar products with almost the same features. Well, here comes the role of product differentiation which displays the highlights of each product and ensures we make the right decision based on our needs and preferences.

This method is widely used by businesses to distinguish and understand the difference in the functioning, features, bottleneck, usability, flexibility and more of a product or services from similar ones in the market. In this blog, we will throw some more light on product differentiation and understand it using interactive examples.

Product Differentiation Definition

Product Differentiation is a property which is used to distinguish between one similar product to one or more than one product in the same category. The product differentiation directly aims to grab consumer’s attention towards the benefits of a particular brand when compared to others.

Product differentiation

Product differentiation is an important strategy which highlights the important qualities of a product or services offered by a company simultaneously differentiating the same product from other companies and their shortcomings. With proper product differences more sales opportunities can be created.

Product Differentiation: Key Takeaways

Product differentiation is used to distinguish between two or more products or services of the same category from different brands.
Marketing teams along with other teams distinguish their item from other brands through product design, packaging, pricing, marketing, and more.
Marketing, Product management, engineering, sales, and support teams are responsible for ensuring the smooth flow of product differentiation.

Why Is Product Differentiation Important?

Product differentiation is directly proportional to the survival of a product in the market. With increased accessibility and technologies there are many brands in the market which increases the competitiveness with a stronger impact. Companies use product differentiation for their survival and highlighting their superiority over the other organisation in the same field.

As a product manager you have to highlight the speciality of your product along with their features, flexibility, scalability, efficiency, and more. If the product differentiation is not up to the market then the chances of getting disappeared in the big sea filled with competitors.

Who Handles Product Differentiation in Organisation?

Product differentiation is not a specific department role in an organisation. It is a feature which needs to be in the mind of everyone during the product development. However, marketing, engineering, design, product management, sales, and more of these teams play a major role in product differentiation as they all add to the features and functionalities of the product to make it stand out in the market.

Product differentiation

Most of us think of marketing as the only team who plays a major role in product differentiation. However, it is more than that it is not only limited to marketing as every single phase of development through different departments adds some unique features in the product, such as the design team makes the product look better, appealing and interactive, while the development team adds to the functionalities of the product.

Similarly the support team provides smooth and seamless support to their users any time. All these things adds to the product differentiation in an organisation.

Types of Product Differentiation In Market

There are more than one type of product differentiation in the market which is considered by professionals from different industries.

1. Horizontal Differentiation

Horizontal differentiation is a method to highlight the differentiation in the product when the products different in features which is neither nor worse when compared to other products. The customer preference matters in this type of product differentiation.

For example, two smartphones may have similar specifications but come in different colors or screen sizes. Customers choose one of them based on their personal preference. This type of differentiation is very much common in industries like fashion, food, and consumer electronics.

2. Vertical Differentiation

This differentiation highlights the product that varies in quality or performance levels. For instance consider a luxury car with advanced safety features and premium materials more than a base model. The customers with higher budgets and earning sources can easily opt for this option while people with tight budget will go with the basic variant.

3. Functional Differentiation

Functional difference is a strategy which focuses on providing new and unique features with capabilities to enhance the usability and problem solving for the product.

For example, we have a smartwatch which can easily track advanced health metrics like blood oxygen or ECG offers a functional edge over a basic fitness tracker. This type of differentiation attracts users in spending their money on products.

4. Brand Differentiation

Brand Differentiation highlights the difference between products based on their brand identity which can influence the decision of customers while purchasing from a specific brand. For example big companies like Nike, Coca-cola, Nike, Apple and more stand out from other companies even when the products are the same and cheap.

5. Price Differentiation

Price differentiation can be one of the most important factors of product differentiation after the brand name where most of the consumers mainly go for price first and then inspect the quality of the product. A company can launch similar products or services of the same category under different plans to get a wider audience and sales.

You must have noticed a lot of subscription plans on different platforms like Netflix, Amazon Prime Video, YouTube, Spotify, and more. All these platforms offer different price slabs keeping in mind the needs and budget of the users.

Product Differentiation Examples

Let us take an example of the Apple brand, you might have heard about it or even thought of buying one in the future. Well, Apple uses multiple types of product differentiation to stand out in this highly competitive market.

How Apple Sets iPhone Apart from Other Smartphones?

Apple offers features like iOS ecosystem, faceID, Airdrop, iMessage which are exclusive of its devices only and these features create a unique and seamless experience for users on the device. Apple built its strong identity based on innovation and luxury. Many customers choose the iPhone because of the reliability, simplicity and features it offers.

Product differentiation

You can opt for many different models in Apple based on your preference and budget. Each model has some feature upgrades, camera enhancements, processing power, and more. When compared with Apple other brands fail in offering a clean interface and running experience on the device. iPhones provide high resolution cameras performing much better than any competitor.

Apple provides a safer browsing experience blocking all third party ads which can hamper your experience unlike android devices which are filled with ads and third party applications. Breaking the locks of an Apple iPhone is a tedious task and if someone steals your phone you can easily track iPhones from any other device and get precise location. These features make Apple iphones stand out in the market.

How to Develop a Product Differentiation Strategy?

Let us get you through a small overview of some of the most important ways of developing a strategy for product differentiation.

Make sure you are familiar with what is trending in the market, your target audience needs and preferences to offer them the features they need.
Carefully prepare a plan with your entire team to make sure that your product can easily be distinguished in the market.
Always stay familiar with your competition in the market, conduct a SWOT analysis, and identify areas where you are weak and take steps to fix it.
Always keep your mind focused on what makes your product better, faster, easier or more valuable than the others. Highlight the key features of your product.
Follow a customer centric approach while building or marketing the product as it will produce you more favorable results.
You can use storytelling to convey your product value and inspiration. These brand messages can enact communication and build trust among consumers.
Always monitor customer satisfaction and retention. Make sure to collect users feedback for your product and always consider room for improvement.

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Product differentiation FAQs

Q1. What is Product differentiation?

Ans: Product Differentiation is a property which is used to distinguish between one similar product to one or more than one product in the same category.

Q2. What is the objective of product differentiation?

Ans: The product differentiation objective is to grab consumer’s attention towards the benefits of a particular brand when compared to others.

Q3. Why is product differentiation important?

Ans: Product differentiation is directly proportional to the survival of a product in the market. With so much competition in the market companies use product differentiation for their survival and highlighting their superiority over the other organisation in the same field.

Q4. Who handles product differentiation?

Ans: Product differentiation is not a single department responsibility it is a collective approach where each department such as marketing, development, design, support, product management, and more contributes to help distinguish the product in the market.