Product Differentiation Definition Example Essay

In a competitive business world, companies should constantly examine their products and services to better serve customers. What worked and yielded profits last year may not work as well this year. Product differentiation and positioning are key parts of a company's marketing strategy and are necessary to keep ahead of competition. They also require an innovative spirit coupled with careful analysis.

Product Differentiation

Product differentiation is the incorporation of attributes, such as quality or price, into a product to encourage the intended customers to perceive it as different and desirable. For example, if your company sells seat belts to automotive manufacturers, perhaps your unique value is never-fail, on-time delivery with no rejected belts. If other seat belt manufacturers are not meeting these desired goals, you will have a unique advantage against your competition, and will have differentiated your seat belts from those of your competitors.

Product Positioning

Positioning is how you provide your product or service brand identification as you go to market. It is the next step after you have determined how to differentiate your product or service. In the seat belt example, the seat belt manufacturer can market itself on the premise that it does not miss delivery times and that its products are free of flaws. The product is positioned against those of competitors on the basis of timely delivery and excellence in manufacturing. All of the seat belt manufacturer's major marketing efforts should emphasize this positioning in the marketplace.

Positioning Statement

A positioning statement is a short sentence or phrase that conveys the essence of the differentiation and positioning strategies and is developed after these have been set. This statement is used as a marketing tool by which to judge all marketing materials to see if they are in keeping with the strategies. A positioning statement for the seat belt manufacturer might be, "On-time delivery and flawless manufacturing." This statement can, though it does not have to, appear in all of the seat belt manufacturer's marketing materials. Rather, it is often used as a check to make sure all marketing materials produced convey the essence of how the product is differentiated and positioned against competitors.

Relationships among the Three

Product differentiation, positioning and positioning statements go together one after the other. Once you have decided how best to differentiate your product based on customer needs and wants, the next step is to determine how to position it in the marketplace. The positioning statement then follows the positioning strategy.

The Importance of Imagination

Successful differentiation and positioning strategies depend on an imaginative approach to the marketplace. For example, if you are a tennis racket manufacturer making high-performance rackets for the serious tennis player, you might consider opening up an entirely new market segment. This might be the creation of high-performance rackets for the average player, who can then benefit from the technology previously only offered to pros.

About the Author

Lisa Nielsen is a marketing consultant for small businesses and start-ups. As part of her consultancy, she writes advertising copy, newsletters, speeches, website content and marketing collateral for small and medium-sized businesses. She has been writing for more than 20 years. She is also a business strategist, trainer and executive coach. Nielsen holds a Master of Business Administration from the University of Miami.

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What is product differentiation?

Product differentiation is simply the characteristics that define your product and make it unique to customers. You may hear it called the unique selling proposition or abbreviated as the USP.

Why is product differentiation important?

For brands, the field of competition is more crowded than ever. When faced with too many choices, consumers can be overwhelmed, and often walk away rather than make a difficult decision. That is why it is imperative to find a way for your product to stand out and be considered uniquely valuable.

You want it to be crystal clear to your customers what you are offering and how your product compares to competitors. If you have other products, you also want to make sure each product has a clearly defined identity to eliminate confusion for customers. Creating a differentiated product which appeals to your target market can help to build your competitive advantage over other brands.

What are some ways to differentiate your products?

You do not want to be different just for the sake of being different. Instead, consider what matters most to your customers, and let that drive your decisions on how to differentiate your product. Your product differentiation should arise after careful study, and should be part of your larger strategy for the product. With that said, here are some common ways that a product can stand out:


What value can customers expect to gain from using your product compared to others? What problem is the product going to solve? How is it going to make their lives better? For example, yours may be the only brand offering a mobile app that saves actual time from an activity that parents must do (but do not like) every day.


Does the product have a different design that distinguishes it from the rest? For example, your product is sleek while your competitors' offerings appear clunky or dated. This distinction may help customers connect with your brand. For example, think about the modern design sensibility of the Nest thermostat. Instead of copying the rectangular shape of other thermostats, the company opted for a simple circle with an easy-to-read, color-changing display. This fresh take on an old idea helps the company sets their product apart and gain a competitive advantage.


Is your product priced lower or higher than your competitors' products and other products you offer? Your price should reflect the overall value that you are offering in the product. For example, you can justify a higher price if customers recognize that the product offers unsurpassed quality. This is how a luxury brand like Ferrari can command a top asking price for their cars. Ask too low of a price, however, and customers may not see your product as truly valuable.


Does your product simply work better than your competitors' products? Do you offer some functionality that your competitors do not? Can users expect the product life to last longer than other products? Your product's competitive advantage may indeed prove to be superior construction and dependability.

Customer service

Your product may be similar to others in many ways. However, you can differentiate your whole offering — and build your competitive advantage — by assembling a stand-out support team and earning a reputation for being ultra-responsive to customers' needs.

For example, the #1 core value for Zappos is "Deliver wow through service," and they succeed — even though Zappos does not always have the lowest price. A customer who orders by midnight may receive their package by the next morning. This emphasis on customer service pays off — judging by the fact that 75% of their sales are reportedly from repeat customers.

Remember, the way you differentiate your products should not be an arbitrary decision, or a knee-jerk response to whatever your competitors are doing. Rather, your product differentiation should arise from your higher-level strategy for your product and your business.

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