What is Product Differentiation?

If you have recently started a small business and have begun to market your company and its products or services, you may have come across the term “product differentiation.” You may know that this term has something to do with advertising your product’s unique qualities, but if you are like most small business owners, you have probably never had a marketing class before and don’t quite know all the ins and outs of this marketing strategy. You may even be wondering why you need to know the details of product differentiation. The reason is that becoming familiar with the term will help you advertise your offers successfully.

Product differentiation is distinguishing one product or service from another that you offer or from the products of the competing business down the street. Differentiation is merely creating the perception of a difference, even if there really is none. You are simply trying to make your product more desirable to a niche market by listing the differences between your product and another.

Many factors affect product differentiation but, contrary to popular belief, are separate marketing strategies. Branding, changes in the product itself, and distribution are all different marketing tactics that can influence product differentiation but are not differentiation itself. For instance, your brand is simply a packaging difference, not what makes the actual product unique.

When using product differentiation to reach your target audience, compile a list of what makes your product better than the rest. This list should be tailored to the consumers you are trying to reach. Some examples are differences in quality, price, features, or design. You may also want to reveal the limits of the competing product. Remember that the purpose of product differentiation is to make your product appear different even if it is very similar to competitors’ products. Your job is to take a stance in advertising that influences customers’ perceptions of your product. For successful product differentiation, you must make consumers believe that your item is the best out there.