Product Differentiation is a marketing strategy that simply put, is all of the attributes of a product or service that are different and unique amongst the backdrop of similar competitors in the market. The term Product differentiation is how a company’s products stand out from other brands. When products are noticeably different or come with exclusive aspects that other companies don’t offer, then there is usually a competitive advantage in the market place and it peaks the interest of potential consumers. Product differentiation often leads to a boost in sales and an increase in brand loyalty.
Marketing efforts in product differentiation come in many different forms and even simple strategies such as new product packaging, design, pricing, and marketing tactics. Any changes that make a product stand out gives businesses a competitive advantage. The more a product or service stands out in the marketplace, the more likely it is to build brand awareness. Consumers are always looking for products that can prove they can do one better than other brands or generic brands. Product differentiation builds a greater value proposition and this helps the product or service appear more appealing to the target audience.
Product differentiation is a must for businesses looking to stay afloat in a crowded market. Showing consumers how their products get the job done, but also go the extra mile in ways the competitors cannot is what draws consumers in. Although Product differentiation causes even more competition in the market, it also allows price control for consumers and gives companies an increased market share.
Product Differentiation Explained
Product differentiation explained in simplest terms is merely the way a company markets its products to motivate consumers to buy their brand over another. There is so much competition that businesses have to find ways to make their products stand out and product differentiation is the process of making a product stand out through various means and ultimately wooing consumers to purchase because of the uniqueness of the product.
For small businesses product differentiation can be a little more challenging because competition from large corporations can be fierce. Instead, small sized companies may choose to focus on other aspects such as excellent customer service that surpasses the big box names or product guarantees.
Significance of Product Differentiation
As previously mentioned, product differentiation controls pricing for consumers because of such a highly competitive market. Without product differentiation, small businesses would be blown out of the water by large companies because big companies have all the necessary resources and frankly, all of the money they need to mow down their competitors with pricing. Product differentiation gives everyone a chance at success in the marketplace.
Types of Product Differentiation
The goal of product differentiation is for companies to show consumers how their products or services fulfill the role and function of any other brand, but also go above and beyond in presenting unique features or aspects of the product or service. Some of the ways in which businesses can showcase product differentiation are:
● Price: Pricing in product differentiation can work two ways. Companies can set a lower price than all the other competitors in order to lure customers in with cost-saving measures, or they can hike the price to appeal to consumers who tend to buy pricier products because it gives the impression of higher quality or luxury. Product differentiation uses pricing in different ways depending on the types of consumers they are looking to attract. A classic example is the baby company EvenFlo, that produces baby products and baby gear at a fraction of the cost of many name-brand car seat companies and strollers.
● Performance and Reliability: Product differentiation can present itself in the form of higher performance or a stronger and longer-lasting product. Scrub Daddy is a classic example of a company that boasts greater durability, function, and purpose with their all purpose dish sponges.
● Location and Service: Companies that offer product differentiation in terms of location typically market messages that their local business will benefit the surrounding community, and will source materials from local factories etc. This type of product differentiation shows consumers that a business truly cares as opposed to big name brands that can’t relate to someone living in a small city. Offering seamless customer service is also a way to attract consumers because they want to know that they can do business in person without the extra hassle of waiting on multiple phone lines for sometimes hours at a time.
Quantifying Product Differentiation
Product differentiation is not a concept that can be measured with precision or quantified in numbers. There are some aspects that can be indentified in terms of pricing, whether or not a product is priced higher or lower than other competitiors, but the other aspects of product differentiation are abstract in natrue and truly at the discretion of the consumers. Examples of subjective measruements of product differentiation are products being marketed as luxury items. There is no way for a company to measure the amount of luxury within their product. Instead, all a company can do is market the product in a way that makes the product or service appear high-end and more expensive. This tactic of course will vary in it’s effectivness based on the audiences that are being reached so product differentiation can only be measured to a certain extent with qualities such as price or quality.
Vertical, Horizontal, and Mixed Product Differtiation
There are two clear models of product differentiation which are vertical differentiation and horizontal differention. When a consumer purchases a product with a combination of vertical and horizontal differentiation, it is called mixed product differentiation.
Vertial differentiation is a when a consumer classifieid or oders products based on certain measruabke factors, one such factor being price and utliatmely chooses the product or serivce that is at the top of the list or the most favorable of the products based on the measurable quality.
Horizontal differentaion occurs when a consumers makes a purchase based on their own personal tastes or preferencnes. If a consumer is more partial to a certain product because of it’s shape, color, or flavor, this is considered horizontal differentiation because it’s appealing to immeasurable aspects.
As noted a mixed product differentiation is a combniation of the two; vertical and horizontal. This is a bit more involved because the consumer is making a purchase based on both subjective and measurable qualities.
Key Takeaway
Product differentiation is crucial for any business to thrive in a competative market. The term refers to how a product is marketed to stand out against the competing brands. The product may fueature unique qualities such as an alluring design, higher durablitly, or lower price. Product differntiation aims to show consumesr that one product from a company is better than another similar product form a different company.
