Product Differentiation – Definition

Cite this article as:"Product Differentiation – Definition," in The Business Professor, updated December 2, 2019, last accessed October 24, 2020,


Product Differentiation Definition

Product differentiation refers to a marketing process in which a potential customer is provided with the unique benefits of a particular market good or service in an attempt to beat competitors. In this marketing system, the qualities of the product are revealed openly to the customer, and this is done to capture their attention. Successful product differentiation creates a competitive edge for the seller in the market. Product differentiation in the market helps to capture the consumer’s interest and in most cases, it is carried out to increase brand loyalty and score higher market points.

A Little More on What is Product Differentiation

Product Differentiation is carried out in an attempt to make consumers prefer one product to another. It is usually carried out in a market where the competition between different products is extremely high. This marketing process highlights the benefits of one product from the other and uses the difference to influence consumer’s choice. This system is highly targeted and helps set one product above the other. The references to the qualities are reflected in the product’s packaging and promotion, and most times, it is reflected in the name. Some examples of firms that employ the product differentiation system include FreshPet and Fancy Feast. FreshPet brand reveals the use of natural ingredients in creating pet food, while Fancy Feast uses a marketing method where they state that their high-quality cat food is something that any pet would love. They also include the use of top-notch advertising to back their claims. Also, Hill’s Science Diet conveys the message that their cat food is develop by experts in the field.

Product differentiation as a marketing process doesn’t need to take much efforts. It can require just adding new functional features to products, or simply by redesigning the product packaging. In most cases, product differentiation doesn’t require making any change to the product in question, but entails a difference or improvement in the advertising campaign of the product in question. This marketing process is often subjective as it is aimed at altering consumer’s perspective of a product in comparison to another. For example, the phrase: “Get out the toughest stains” is a term used to differentiate a detergent from another. When used, it implies that the particular detergent being advertised is better than other detergents in the market. In most cases, the actual difference between both products might be very insignificant or even non-existent.

Simply put, product differentiation will tell consumers that a particular product has the same features of its competitors, will be able to perform the same tasks of competing products, but also highlight an additional benefit of using that product to make it stand out from others. Sometimes, this additional benefit might be a higher quality of the advertised product, or simply a lower price of obtaining it.

Important Points

  • Product Differentiation focuses on the customer’s interest on one or more benefits of a brand that increases effectiveness when used compared to other products.
  • Differentiation has no fixed form, it can be reflected in the name, the product packaging, and most times in the promotion technique or advertisement campaign of the consumer.

Different Examples of Product Differentiation

It is easy to see firms citing their new products as cheaper when compared to that of competitors. Oftentimes, companies also stated the cost benefits of purchasing and using their new products. If Firm D manufactures tea flasks and water canteens which are not easy to differentiate from the tea flasks and water canteens that Firm H produces, then Firm D might be required to offer their products at a lower cost. If Firm D’s tea flask contains with a highly durable thermal vacuum, then it will be advertised as a way to pack up lunch and dinner in the morning, as the tea poured into such a flask won’t get cold before it is consumed by the customer.

A perfect field where product differentiation is highly applied in today’s market is the coffee maker product space. KitchenAid coffee makers are offered to consumers at a hefty, high, and a premium price, which not everyone can afford. Keurig applies product differentiation by making use of coffee pods. While Amazon Basics as usual always offers incredibly cheap prices to customers looking for coffee makers. Due to the subjective and non-written mode of product differentiation, the way the marketing process is carried knows no bars. If the functional aspect of a product cannot be differentiated from that of its competitors, then the advertising brand might choose to pique the interest of consumers by using non-functional aspects of the product. This change can be a simple design of the product packaging, or a more sophisticated advertising campaign.

Sometimes, the most effective method of making a product stand out from its competitors is by adding a touch or spicing up its advertising campaign. Through advertising, one brand can be differentiated from another even though there is really no difference between the products that they offer.

Pros of Product Differentiation

Product differentiation is used as a way to increase brand loyalty and raise consumer’s awareness of a product. This marketing process is employed to pique the interest of a potential customer, and most times used to make a good survive a higher price point. The latter is true, as consumers are ever ready to pay a higher price for a good or service if they perceived it to provide higher value than another product.

References for “Product Differentiation”…/what-is-product-differentiation › Accounting Dictionary

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