Product Differentiation: A Complete Guide In 5 Easy Points

Ajay Ohri


What is it that makes your product different from the rest? What is it that makes your product more appealing to your clients as compared to the other options that are available in the market? This is through product differentiation which gives you a competitive advantage in the market. Product differentiation can be possible through better quality, better price, and some other unique benefits and features in your product.

In this article let us look at:

  1. What is Product Differentiation?
  2. Examples of Product Differentiation
  3. Types of Product Differentiation
  4. Product Differentiation Tools
  5. Advantages of Product Differentiation

1. What is Product Differentiation?

Product differentiation is what makes your service or product to stand out in front of your target audience. It lets you distinguish your product from what your competitors sell. It is product differentiation that helps to increase loyalty towards the brand and improves its growth and sales.

The packaging, price, customer service, quality, and the overall experience are also what goes into creating product differentiation for the product. Like for example, if you are a makeup company then you could offer tools that let the consumer try the product on them online and then decide whether or not the shade would suit them. Customers are willing to accept and even pay more for products that offer to them a useful and unique experience.

2. Examples of Product Differentiation

Here are the product differentiation examples Some companies will usually cut their cost to differentiate themselves from their competitors. The company also tries to highlight various other savings when consumers use its products. This could be in the form of reusable components that do not lead to any repetitive costs. Reach out to any e-commerce store and you will see how the products are differentiated vividly and displayed to attract clients. Product differentiation is thus an important component of marketing and through this, the consumer can decide why he should choose product X over product Y.

3. Types of Product Differentiation

Ideally, when it comes to differentiating the product it should be able to demonstrate that it can do all that its competitor has to offer and give something extra too. Below are some of the types of product differentiation.

  • Price 

Companies may charge a low price in order to attract buyers who are cost-conscious. Companies may also charge a high price if it wants to tap the luxury segment and show what its product is worth it.

  • Performance and Product Reliability 

Products that are reliable and capable of offering value for the long term are seen as much better than their competitors. An increase in performance is also used to differentiate products like in the case of batteries.

  • Location and the Service 

Small and local companies have to promote themselves as a local business. Businesses in the neighborhood then showcase themselves as offering higher quality products which justifies their higher price over the national brands.

Here is how product differentiation helps to change the buyer’s decision.

  • Vertical Differentiation

Vertical differentiation is where the customer chooses a product when they rank the product from the best to the worst using a measurement objective which could either be quality or price. The measurement is objective and the value that every customer places on the product will vary.

  • Horizontal Differentiation

Horizontal differentiation is where customers have to choose subjectively between the products because there is no objective measurement that can categorize the product as the best or as the worst. Like in the case of ice creams where the choice is dependent on your preferences.

  • Mixed Differentiation

Those who wish to make a complex purchase would use a mixture of vertical and horizontal differentiation when they make a purchase decision. Like when you are buying a car then this will include vertical differentiation to rank the car based on safety and mileage. Then there is the horizontal differentiation based on impression, colour, and aesthetics of the car brand. The customer values both these differential factors individually.

4. Product Differentiation Tools

Here are the product differentiation tools

  • Product Lifecycle Tool

When the product is in the product lifecycle then you can decide on the next strategic move. The price and the promotion options let you decide what the best way to differentiate your product is. Like if the product is in the growth phase then improving the version in the product line helps to target various markets. The price of the product lets it gain share and allows making a deal. The promotional offers go behind differentiating your product from your competitors’ products.

  • Kano Model

To decide on what could be a part of the next product offering is not easy. One way to achieve this is to include a product “delighter”. This is a feature that lets your customer feel WOW about your product. The Kano model divides the features of your product into the features that you should have, the features that you are capable of offering, less or more performance, and the features that can delight your clients.

  • Kotler’s and the Mature Market

It is exciting to make a new and different product version but that could be a headache for your customer. A better way is to promote your stability instead. The model works in the mature market where you remind your clients that you are still the most trustworthy brand. You differentiate yourself as the most reliable and trusted brand among your competitors.

5. Advantages of Product Differentiation

Now that we are aware of the product differentiation meaning here are its advantages. A differentiated product is able to increase loyalty towards its brand and also can survive when there is a high price point. The differentiated marketing strategy can let companies stand out even when their product is not perceived to be different from its competitors like in the case of bottled water. Here the strategy could be bettering the packaging, lowering the price, or making the design appealing. The secret to using product differentiation better lies in successfully communicating the distinctive feature of your brand. Another vital importance of product differentiation is that it helps to narrow down your target audience.


So we are now clear about what is product differentiation. The best way to start product differentiation is to focus on the needs of your customers. Look at what they wish for and what is it that no one gives to them. Look at what is it that delights your customers and what they do not like. What is it that makes them feel good about your product? All these are questions that if answered well and implemented into your product can help to differentiate your product.

Interested to learn all about Product Management from the best minds in the industry? Check out our Product Management Course. This 6-month-long program takes place online through live instructor-led sessions. It is the only program in India that offers the ‘Bring Your Own Product (BYOP)’ feature so that learners can build their product idea into a full-blown product, and go through an entire Product Development lifecycle. Not only this, but this is the only program in India with a curriculum that conforms to the 5i Framework. Post completion, learners receive a joint certification from the Indian Institute of Management, Indore, and Jigsaw Academy.

Also, Read

Product Owner: A Beginner’s Guide In 5 Easy Steps

Related Articles

Please wait while your application is being created.
Request Callback