At its core, a product differentiation strategy is a form of marketing designed to help your company stand out from competitors. It defines what makes your products or services different from rivals and explains what makes you a must-have compared to them.
“It’s very easy to set up a company and develop a product today, so it’s vital that you can differentiate your products and services from the plethora of options available to your customers,” says Ryan Haynes, founder of marketing agency Haynes Marcoms. “If you’re an SME, then competing on product features alone might not be enough to help your product stand out next to bigger, more established competitors.”
Why a product differentiation strategy matters
“A good product differentiation strategy will address the barriers that might stop or slow down a customer’s decision to buy from you,” says Haynes. “If you’re trying to break into a crowded market, differentiation helps you to compete, reduces the sales cycle, and builds loyalty with your customers.”
Product differentiation can take many forms. It can be something tangible, such as a product offering that provides more features, better performance, or superior service compared with rivals. Or it can be more conceptual, such as a solution with better styling or presentation than its competitors. It may even be a direct reflection of your company’s mission and values, such as eco-friendly offerings or ventures designed to promote social good.
Above all else, though, a sound product differentiation strategy serves to help your solutions jump off the shelf at a single glance and inspires customer loyalty.
Haynes advises not to rely overly on prices or features to differentiate your products. “Competitors can easily replicate these things. Expand your strategy to focus on changes that help solve your customers’ problems faster and offer support and insight that makes customers feel more comfortable with purchases. The best differentiation is focused on your company, your vision, and your values because they can’t easily be replicated.”
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Designing an effective product differentiation strategy
Your product differentiation strategy might also be referred to as your USP (unique selling 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 at a glance or in a simple ‘elevator pitch’ that takes 10-15 seconds or less?
Designing an effective strategy doesn’t necessarily mean going all-in on research and development or investing heavily in manufacturing and engineering. You often find success here by brainstorming a clever marketing or sales angle around which to position your company’s products.
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Find your product differentiator
Of course, as you go about crafting your product differentiation strategy, it helps to bear in mind how products can be differentiated. These criteria include the following:
Price
- Affordability / Cost
- Value
Performance
- Durability
- Innovativeness
- Privacy
Quality
- Safety
- Speed
- Versatility
Lifestyle
- Healthiness
- Sustainability
- Taste
Service
- Convenience
- Customer Service
- Flexibility
- Availability
It’s possible to differentiate at opposite ends of the spectrum of many of these attributes. Think of the many retailers that compete on low-cost items and those that compete on high-cost luxury brands. Should you choose to offer general audiences a predictable and uniform solution or promote more personalised services and offerings to a smaller, more niche market?
Find your brand differentiator
Your challenge as a business owner is to identify the attributes that most define your brand and the audience most receptive to them. Afterwards, you can work backwards to define messaging strategies that explains the difference.
Try differentiating your business by adopting a more fun, innovative or offbeat attitude than competitors or conducting clever product tests and comparisons that set you apart. Find new customers by catering to the needs of smaller or more underserved audiences, promoting social good and worthy causes, or partnering with other organisations to create positive change or unique crossovers.
Packaging and presenting your products and services in clever and creative ways and delivering superior or more individualised customer service and support can also make a big difference. Piggybacking on newsworthy and trending topics can also help you find your differentiator.
Consider the case of bottled water: From a 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.
The bottom line: 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 smart product differentiation strategy can help set you up for success by cutting through the white noise and making a strong impression in the mind of your target customer.
In many ways, it doesn’t matter how unique you actually are — just how unique you’re perceived to be. Success is often just a clever hook or catchy slogan away, no matter what kind of research and development budget you’re actually working with. True; if you’re not offering something for sale that’s essential when things come down to it, you’re more easily replaced. 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.
“Your objective is to go from vying for your customer’s attention in a red sea of sharks to creating a defined view of your company that creates a blue ocean of opportunity,” says Haynes. “This requires you to look closely at your business to identify the real value you are – or could be – providing to customers.”
- The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. The American Express Business Gold Card has an annual fee of £195 (£0 in first year).
- If you’d prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card.
- Membership Rewards points are earned on every full £1 spent and charged, per transaction. Terms and conditions apply.
