What is a Differentiation Strategy?

Differentiation is a strategy for showcasing unique attributes of a product or service to differentiate it from the other existing competing products or services in the market. It intends to convince the customer that a particular product is unique in its quality and features and is superior to other similar products. 

Product differentiation is done using various methods. That is, the perception of value can be created by various methods.  The change is often subjective, influencing the individual customer's perception about the product.

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Example of Differentiation

Say for example, company X and Company Y manufacture similar hand-soaps. Then X introduces a special ingredient in their hand-soap to make it different from the Y s. This ingredient can be anything that enhances the value of the product. They can use a specific fragrance or a bit more moisturizer. Alternatively, X can differentiate their same hand-soap even without introducing the new ingredient. They can simply change the packaging to improve the aesthetics. They can also use promotional campaigns to differentiate their products without altering anything in it.

Related Topics

• Competitive Strategies
• Functional Strategies
  
• Organizational Strategies
• Operational Strategy
• Contestable Market Theory
• Value Disciplines
• Porter's Generic Strategies
• Differentiation (Strategy)
• Commoditize
• Niche Market Strategy
• Long Tail
• Low-Cost Production
• Resource-Based View of the Firm
• Ansoff Matrix
• Customer-Centric Strategy
• Blue Ocean Strategy
• Overfished Ocean Strategy
• Hedgehog Concept (Strategy)
• Innovation Strategy
• Bleeding Edge
• Disintermediation (Strategy)
• Strategic Alliance
• Coopetition (Strategy)
• Loss Leader Strategy
• Lean Strategy
• Game Theory Perspectives

Related Topics

• Market Structure
• Perfect Competition
• Bidding War
• Complements & Substitutes
• Substitution Effect
• Imperfect Competition
• Market Power
• Price Takers
• Price Makers 
• Perfect Competition and Decision Making
• X-Efficiency
• Captive Market
• Contestable Market Theory
• Highest Profit Point in a Perfectly Competitive Market
• Marginal Revenue
• Using Marginal Revenue and Marginal Costs to Maximize Profit
• Marginal Revenue Curve
• Profit Margin and Average Total Cost
• Break Even Point - Cost Curve
• Shutdown Point - Cost Curve
• Short-Run Decisions Based Upon Costs in a Perfectly Competitive Market
• Marginal Costs and the Supply Curve for a Perfectively Competitive Firm
• Long-Run Average Supply (LRAS)
• Decisions to Enter or Exit a Market in the Long Run
• Long-Run Equilibrium in a Perfectly Competitive Market
• Constant, Increasing, and Decreasing Cost Industries
• Productive and Allocative Efficiency in Perfectly Competitive Markets
• Market Efficiency
• Market Inefficiency
• Pareto Efficiency
• Market Failure 
• Search Theory
• Monopoly
• Natural Monopoly
• Legal Monopoly
• Bilateral Monopoly
• Promoting Innovation through Intellectual Property
• Predatory Pricing
• How Monopolists Set Price with the Demand Curve
• Total Cost and Total Revenue for a Monopolist
• Marginal Revenue and Marginal Cost for a Monopolist
• Inefficiency of Monopoly
• Perfectly Competitive Market
• Monopolistic Competition
• Duopoly
• Oligopoly
• Differentiated Products
• Perceived Demand for a Monopolistic Competitor
• Monopolistic Competitors Choose Price and Quantity
• Monopolistic Competitors and Entry
• Monopolistic Competition and Efficiency
• Cartel (Economics)
• Game Theory
• Traveler's Dilemma
• Prisoner's Dilemma
• Iterated Prisoner's Dilemma
• Nash Equilibrium
• Diner's Dilemma
• Trembling Hand Perfect Equilibrium
• Gambler's Fallacy
• Arrows Impossibility Theorem
• Backward Induction
• Tournament Theory
• Oligopoly and the Prisoner’s Dilemma
• Forcing Cooperation in a Prisoner’s Dilemma
• Cooperation and the Kinked Demand Curve
• Corporate Merger or Acquisition
• Antitrust Laws
• Herfindahl-Hirschman Index
• Concentration Ratio
• Other Approaches to Measuring Monopoly Power in an Industry
• Restrictive Practices under Antitrust Law
• Natural Monopoly
• Cost-Plus Regulation
• Price Cap Regulation
• Regulatory Capture

Related Topics

• Organizational Strategies
• Growth-Based (Expansion) Strategies
• Inorganic Growth
• Organic Growth
• Diversification
• Concentration
• Integration or Combination (Horizontal and Vertical)
• Asset Acquisition Strategy Definition
• Horizontal Integration - Explained
• Backward Integration - Explained
• Internationalization
• Cooperative Strategy
• Consortium Definition
• Stability and Retrenchment Strategies
• Competitive Strategies
• Contestable Market Theory
• Value Disciplines
• Porter's Generic Strategies
• Differentiation (Strategy)
• Commoditize
• Niche Market Strategy
• Long Tail
• Low-Cost Production
• Resource-Based View of the Firm
• Resource Dependency Theory
• Ansoff Matrix
• Customer-Centric Strategy
• Blue Ocean Strategy
• Overfished Ocean Strategy
• Hedgehog Concept (Strategy)
• Innovation Strategy
• Bleeding Edge
• 3 Horizons of Growth
• Disintermediation (Strategy)
• Strategic Alliance
• Coopetition (Strategy)
• Loss Leader Strategy
• Lean Strategy
• Game Theory Perspectives
• Functional Strategies
• Marketing Strategy
• Zero-Cost Strategy Definition
• Mobile First Strategy Definition
• Operational Strategy