By Fernando Berrocal

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“Product differentiation” is a term that is used regularly in the business world.  Its definition, significance, and related methodologies are explained far less frequently.  So what does it all mean? Product differentiation is a business strategy used by organizations to stand out from competitors.  It focuses exclusively on their products and/or services. This can be achieved by either contrasting the key characteristics of several items, or by introducing new products with a wider range of useful features.

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Alt text for the image above: Product Differentiation

Your next logical query might be: why is product differentiation so important? Your product needs to stand out from the competition in your market and have a competitive advantage.  If you are unable to adequately respond to that, your product will eventually fail.  Contemplate this: how can you expect people to buy from you when they are unaware of what you offer (and the advantages of your business)? The issue is that your firm will eventually fail if you can't sell those products. With this in mind, it is utterly crucial to stand out from the competition–and advantageous to do so as soon as feasible.

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Distinct Product Differentiation Types

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The two basic types of product diversification are vertical and horizontal.

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Vertical: When a business offers items with the same qualities, it frequently makes its distinctions based on quality and cost. For instance, when shopping, you could see a variety of possibilities for a product, but some are more expensive. Even if the materials may be the same, the price might vary depending on where you buy them. Although the products may be nearly the same, there are differences in the materials they were constructed of, how skillfully they were produced, and how much you are ready to spend for each one.

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Horizontal: Price and quality are the only factors in product differentiation. Brand loyalty and individual preferences can be relevant in this realm, as well. One of the major errors was not taking quality and pricing into account. More than just a product, consumers are seeking an experience. They seek assurance that their purchase will support them in projecting a positive self-image.

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Criteria That Help Differentiate Products

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If you're looking for a way to make your product stand out, several more specialized factors can distinguish it from other offerings. 

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• Efficiency and Dependability: A product may occasionally fall out of style or become outdated. So, don’t rely on this as your main sales motivation–it might not be the greatest option. A good question to regularly ask yourself is: do your products endure longer than the competition?

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• Pricing: You probably have experience with the impact that a product's price has on its ability to differentiate. Here are some questions to keep in mind: How do your prices compare to those of your competitors? Is a reduced price a competitive advantage for you? Does promoting your product as an aspirational item help it compete (despite its price)? Or will that price turn away customers?

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• Location: Make it evident that your business is local if you run a brick-and-mortar establishment–so that people will want to support you. Some queries to make are: What about my location is advantageous to my final client? What does "local" imply to me and my business?

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• Service: Service is a popular factor that most businesses try to leverage in product differentiation. Given the abundance of well-known rivals and startups in the IT sector, this facet of an organization’s identity is becoming increasingly crucial. Contemplate aspects such as, what level of service can customers anticipate from your personnel? What specifically makes your service team outstanding? How are your rivals falling short in terms of customer service?

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• Design: In light of increased competition, product aesthetics are becoming very important. Make sure that your product is well-designed if you're seeking to figure out how to make it stand out. In this case, some possible questions include: Does your product offer a comparable service but with a radically distinct design? What distinguishes your design from what your competitors have to offer?  Note: customizing your products is one method to set them apart from your competition. If all of the manufacturers are just selling two types, perhaps you might provide a configurable choice that can accommodate any demand and size.

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How to Create a Plan for Product Differentiation

A product differentiation strategy can be built using a standard method that consists of only three easy actions. 

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1. Research your business market. The first stepin creating a product differentiation strategy is conducting thoughtful market research. You can't know where the prospects for success–and pitfalls–are until you know what other businesses are doing, and how their plans deviate from yours.

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2. Discuss ideas with your term. Some believe that the only responsible group when it comes to creating a strategy for product distinction is the marketing department. This is untrue.  Each member of your team must participate and be heard. Remember:your organization's distinguishing characteristics frequently have little to do with marketing. So why limit your attention to them?

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3. Choose your factors: Finally, choosing your product differentiation elements is the last step. Consider what makes your business unique, and incorporate it into the future. The most crucial thing for your business is to identify what it does well and then spread the word to everyone about it. Stop waiting–start advertising right away.

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In conclusion, your ability to differentiate your product from the ones of your competition is a crucial factor for your potential success. It’s important to know the distinct product differentiation types (vertical and horizontal), the criteria that help differentiate products, and how to create a plan for product differentiation.

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