What is Product Differentiation?
Product differentiation is the practice of separating your product from others in the market to create a distinct selling advantage. By creating a USP (unique selling proposition) you can elevate your product in the minds of consumers and create a specific niche for your product.
Types of Differentiation
There are multiple ways that you can differentiate your product, but first, it’s important to identify which type of differentiation is best suited for your product based on the three categories.
- Horizontal Differentiation – Horizontal Product Differentiation refers to a unique characteristic that your product has that another does not offer. It may be a feature that other similar products do not have. Horizontal differentiation typically focuses on unique features and not on price points.
- Vertical Differentiation – Vertical Product Differentiation focuses on hierarchy and ranks products in a vertical tier from best to worst. The goal of working with vertical differentiation is to have your specific product feature move up the hierarchy tier to the top.
- Mixed Differentiation – Mixed Product Differentiation is a combination of both vertical and horizontal. In this scenario, you have a unique feature that separates your product from the competition, and you want this feature to be the most desired product feature moving your product to the top of the hierarchy tier.
Aspects of Product Differentiation
Once you’ve decided on the angle you’d like to go with the type of product differentiation you can now determine which aspect of your product you’d like to single out and focus on.
- Customization – This refers to the ability to customize your product in a way that is specific to your user. An example would be that your Facebook page allows you to change your profile photo as well as header image.
- Design – It’s common for companies to use design as a unique selling feature, and this does often work well. Apple, for example, leveraged there slick minimalist design for years to compete with other companies who have now adopted a more design-heavy selling approach.
- Features – If your product has a feature that separates it from the competition this can be an example of mixed differentiation. Think of Tesla and its long-range battery that can go 370 miles per charge it’s the longest range battery on the market. The long-range battery is unique and it moves them up the hierarchy for electric cars.
- Price – Organizations often use price as a tool to separate themselves from the competition. This aspect of price differentiation is a tightrope. If you ask too low of a price, your product may not be viewed at the same value that it previously was at a higher price. Walmart is known for its low pricing, however, Tiffanys is not. If Tiffanys started offering their jewelry at Walmart prices it would move them down on the vertical hierarchy based on perception.
- Quality – This aspect can work well if your product does indeed offer higher quality in either product or service. Rolex is known the world over for having high-quality watches and they can charge a higher price due to this differentiation.
- Reputation – A positive reputation can go a long way in acquiring new customers and keeping existing customers. A good product reputation can be the difference between your product being an industry-standard or being just another product fighting for a piece of the pie. If your product can gain this aspect, it’s a good idea to leverage it. A good example would be Starbucks. There’s a Starbucks on almost every corner and their expansion and success are in large part due to their positive reputation. Do you know anyone that doesn’t enjoy Starbucks?
- Service – Having top-level personalized service for your product is an attribute that can separate your product from the competition. For example, if you have a human that responds to customers as opposed to chatbots, that will separate you from your competitors.
Strategies for Production Differentiation
Creating a Product Differentiation strategy is a fundamental aspect of marketing your product well. A product that does not differentiate will get lost in the vast sea of options that are fighting for everyone’s attention. There are a few things to look for while determining which aspect is best suited for your product.
- Asses the Market – Is there a whole in the market that isn’t being filled that your product may address? If so, this is the feature you’ll want to highlight as your USP.
- User Feedback – Ask your users what they like about your product that they feel sets it apart from the competition. They may find something that didn’t realize is a unique selling point.
- The Competition – Compare your product with your competitors to see what advantages your product has over theirs.
Conclusion
Product Differentiation is often seen as a role for the marketing team. However, the team that builds the product knows the product best and therefore should play a role in determining what the unique selling features are that separate the product from the competition. It’s a good idea to have an all hands on deck approach to creating a product differentiation strategy.
