What is product differentiation?

Product differentiation refers to the strategic practice of distinguishing a product from others in the marketplace in order to create unique value for consumers. This is accomplished by highlighting distinct differences in features, design, quality, or branding that set the product apart from competitors. Such differentiation allows a company to target specific consumer needs, preferences, and perceptions, enabling it to stand out in a crowded market.

By focusing on creating unique characteristics, companies can enhance their appeal to specific segments of the market, fostering brand loyalty and potentially allowing them to command higher prices. For example, smartphone manufacturers often differentiate their products through superior camera technology, design aesthetics, and unique software features, which can create a competitive edge.

In contrast, other choices involve approaches that do not aim at creating distinctiveness. Making a product more affordable than competitors focuses primarily on price competition rather than establishing unique features. Offering products in larger quantities may appeal to the volume buyer but does not inherently differentiate the product itself. Reducing features to lower costs typically leads to a more generic product, potentially diminishing its appeal and perceived value rather than enhancing it through differentiation.