At its core, a product differentiation strategy is a form of marketing strategy to help your company stand out from competitors. It not only defines what makes your products or services different from rivals — but it also explains what makes you a must-have when compared with them.
A smart product differentiation strategy can create a competitive advantage in the eyes of your target consumer.
Typical product differentiation examples often involve the case of solutions that set themselves apart by offering better quality, better service or an array of singular features or benefits.
However, business leaders will note that innovation can come in many forms—and that finding success doesn’t always require you to reinvent the wheel from a conceptual standpoint.
What is a product differentiation strategy?
Product differentiation can take many forms. It could take the shape of something tangible, such as a product offering that provides more features, better performance or superior service compared with rivals.
Alternately, it can be more conceptual, such as a solution with better styling, presentation or street cred than competitors. It may even be a direct reflection of your company’s mission and values, such as in the case of eco-friendly offerings or ventures designed to promote social good.
Above all else, a sound product differentiation strategy not only serves to help your solutions stand out at a single glance - but also helps inspire customer loyalty.
The importance of finding ways to stand out cannot be understated. According to 2020 surveys of 15,000 consumers in 27 countries by Salesforce, customers not only now put a premium on brand attributes like likability, empathy, and innovation. Six in 10 companies say it’s now difficult to earn consumer trust.
Businesses hoping to stay competitive in the coming months won’t just face rising competition to attract new clients. They’ll also face growing pressure to retain current audiences and remind shoppers of the value that they offer, even as the competitive landscape is constantly evolving and shifting. In the end, businesses need to introduce new offerings and increase sales of current solutions to a clientele that’s more informed about where it spends every dollar.
A strong product differentiation strategy can help you attract new audiences and keep existing clients coming back for more.
Designing an effective product differentiation strategy
Your product differentiation strategy may also be known as our USP (unique sales proposition). That’s because it challenges you to target the desired audience demographic with clear and convincing messages about what makes your solutions stand apart from your rivals.
This means that designing a winning product differentiation strategy always starts by asking yourself a simple question: What makes you different? And as a follow-up: How can you quickly and effectively communicate this message or in a simple ‘elevator pitch’ that fits in 10-15 seconds or less.
Designing an effective strategy doesn’t mean going all-in on research and development or investing heavily in manufacturing and engineering. Often, you find success by brainstorming a clever marketing or sales angle around which to hang your company’s shingle.
It may also help to note the few sample dimensions around which many companies look to differentiate from rivals. These include:
- Affordability / Cost
- Comprehensiveness
- Consistency
- Convenience
- Customer Service
- Durability
- Flexibility
- Healthiness
- Innovativeness
- Location
- Performance
- Privacy
- Quality
- Reliability
- Safety
- Security
- Speed
- Sustainability
- Taste
- Versatility
- Value
However, it’s also possible to differentiate at different ends of the spectrum of many of these attributes. Think of the retailers that compete on low-cost items and the many that compete on high-cost luxury brands. Should you go big and offer general audiences a predictable and uniform solution or instead promote more personalised services and offerings to a smaller, more niche market? Your challenge as a business owner is to identify the attributes that most define your brand and identify the audience that will be most receptive to them. Afterwards, you can then work backwards to define messaging strategies that split the difference.
While it often helps to incorporate today’s latest features and technologies into new offerings, there are other equally effective ways to attract and engage audiences as well.
For example:
- Piggybacking on newsworthy and trending topics.
- Packaging and presenting your products and services in clever and creative ways.
- Adopting a more fun, innovative or offbeat attitude than competitors.
- Catering to the needs of smaller or more underserved audiences.
- Delivering superior or more individualised customer service and support.
- Emphasising the promotion of social good and worthy causes.
- Partnering with other organisations to create positive change or unique crossovers.
- Conducting clever product tests and comparisons that set you apart from competitors.
Consider the case of bottled water: From a purely functional standpoint, products from any two given rivals are identical. But many firms continue to thrive in the marketplace by differentiating using creative bottle packaging and design or a clever backstory to leap out at shoppers from the shelf. Again, finding success with product differentiation strategies is all about how you choose to package and present yourself.
Make yourself essential
In a world of growing choice, your number one goal from a branding standpoint is simple: Don’t be a commodity. A successful product differentiation strategy can help set you up for progress right out of the gate by cutting through the white noise and making a favourable impression in the mind of your target customer.
In many ways, it doesn’t matter how different you may be — it’s about how customers perceive you. This means that no matter what research and development budget you have, success is often just a clever hook or catchy slogan away.
But don’t forget, people prefer to do business with companies and brands that they like, and often, they’ll pay more for the privilege of doing so.
Above all else, the key is to stand out from the competition and create a meaningful connection with a customer.