How is product differentiation achieved

The goal of product differentiation is to create a competitive advantage or to make your product superior to alternatives on the market.

Kimberly Amadeo breaks down competitive advantage into 3 components: benefits, target audience, and competition. Benefits are the values a customer receives when they purchase your product or service. Businesses often focus on features, but customers are interested in benefits.

Good product differentiation emphasizes the unique benefits of your goods or services. Your product's differentiated benefits should align with the interests, needs, and values of a defined target audience.

To differentiate your product, first think about who wants to buy your product, why they want it, how they want it to look, where they want to purchase it, and how much they will pay for it. You can only differentiate your own product once you know what's already on the market. Take plenty of time to study products and services that potential customers might compare to yours.

What does a competing product do? Who buys it? How much do they pay for it? Keep an eye on branding , features, size, price, and packaging to see what you can do differently to appeal to your target audience. Your target audience ultimately decides which products in the market are most valuable to them. Looking at sales and engagement will give you insight into whether your product or service is well-differentiated.

You can always do more research, add or change a feature, or try a new marketing strategy. Vertical differentiation is when customers choose a product by ranking their options from best to the worst using an objective measurement, like price or quality. While the measurements are objective, the value each customer places on them might vary. For example, 1 meal at a restaurant may be lower in calories than another meal.

To a customer who is watching their weight, the lower-calorie meal represents a "better" option. Another customer might place a higher value on price and choose the higher-calorie meal if it costs less. Horizontal differentiation is when customers choose between products subjectively, because they have no objective measurement to distinguish between best or worst. For example, there is no qualitative measurement to rank ice cream flavors. Whether you choose chocolate, vanilla, or strawberry is entirely a matter of personal taste.

If most of the products on the market cost about the same and have many of the same features or qualities, the purchase decision comes down to subjective preference. Product differentiation is a marketing process used to distinguish a product or service from others in the market with the aim of appealing to a target demographic.

Product differentiation involves highlighting the features of a product or service that make it unique and valued by customers. When implemented successfully, product differentiation builds a competitive advantage because customers view a product as superior over other substitutes.

It also serves as a catalyst in a buyer's decision-making process. Product differentiation helps organizations create products or services that stand out from their competitors.

Increased competition among industries has divided demand among many players, making it important for a business to convince their customers why their products and services are better. Aside from making the product or service successful in the marketplace, product differentiation is also important because:.

It allows a brand to price above the market baseline. Product differentiation relies on the customer's perception of a product and exists in three distinct types:. Products associated with horizontal differentiation offer the same thing at similar price points.

Horizontal differentiation can be influenced by packaging, shapes, flavors and colors. Vertical differentiation refers to distinctions in products that can be evaluated based on quality. Products in this type of differentiation are also dependent on price. The aim of vertical differentiation is to distinguish a product so it can improve toward higher quality and therefore gain a competitive advantage.

Everything from paper towels to frozen vegetables can be purchased in a store-brand version that uses its price point and value to compete directly with nationally recognized brands. This type of differentiation is a combination of horizontal and vertical. Example: A high-end laptop might be priced above its competitors but offer advantages such as speed, battery life and higher resolution.

It would be marketed as unique in the marketplace for its outstanding features but similar to other laptops in the ways that it would be used. A product can be differentiated from its competition in the marketplace in several key ways. Here are the most common ways to differentiate your product or service:.

After-sale services: This factor determines the impression a product leaves on a customer. Research the current marketplace that your product serves and ask yourself the following essential questions:. What kinds of customer needs are not being met with the current marketplace options? Create a team to generate different ideas about making your product unique in the marketplace. The more perspectives you consider, the better.

A team can help you establish several ways you can potentially differentiate your company's product from others in the market. You can start by taking an inventory of the benefits and values your product offers to consumers and establish the importance of those values. Once you have various possible options figured out by your team, look for opportunities to differentiate the product further from other competing businesses.

This is also a good phase to evaluate where these opportunities belong in your company's strategic product roadmap. Related: What Is Strategic Planning? Definition, Techniques and Examples. Product differentiation allows your company to provide superior value to clients at an affordable rate, establishing a win-win scenario that can improve the overall profitability and viability of your business.

Employees, associates, or team members with customer interface can provide and demonstrate competence, courtesy, credibility, reliability, and responsiveness. Responsible for executing day-to-day client-facing communication, they are the linkage between the product and customer. If that linkage breaks down, the business is destroyed. Performance like this creates emotional bonds between the vendor and customer.

This avenue of differentiation is closely related to service, but focuses specifically on the people. Customers want to conduct business with people, not an institution. Building this relationship takes time, but establishes a highly differentiated position. Some businesses set themselves apart by their image either as part of another differentiation avenue or as a separate strategic path.

Normally, image is created by other forms of differentiation such as high levels of service, superior product quality, or performance. Image is controlled and managed by symbols used in communications, advertising, and all types of media — written, digital, and audio, as well as the atmosphere of the physical place where customers encounter the business.

This is not limited to retail businesses only. An image or reputation can be a daunting hurdle for potential new entrants.

DuPont, for example, generally has a strong image as a technical powerhouse in almost all markets in which they participate. The company employs a large number of engineers, scientists, and product development experts. Their sales reps often have a strong technical education or background, and their products are positioned as being leading edge. Milliken and Company has a similar image. For the potential new start-up wishing to compete against such a juggernaut, often the only option is a type of guerilla warfare.

Brand does not automatically differentiate a company from its competitors. The brand has to stand for something, be recognized by the target audience, and communicate something unique and different from the competition. That takes a large marketing budget to pull off successfully. It is understood that it takes seven repetitions of any message to even be heard.

Branding is much more than just creating a logo. It is the ongoing communication of your value proposition in a meaningful and effective way. With a small marketing budget, the smartest, most effective strategy is to move away from a branding strategy and towards a customer-driven strategy. Pick a handful of customers that can drive the success of your business. That could be anywhere from 3 to 4 or 15 to 20, but it is not hundreds.