Is the term to describe the offering of a product that makes it different from other products and more appealing to its audience?
The introduction of unique, distinctive characteristics or features to a product Show
What is Product Differentiation?Product differentiation is the introduction of unique, distinctive characteristics or features to a product to ensure a USP (unique selling proposition) of the product. The differentiation enables a company to achieve a competitive advantage over other companies offering similar product substitutes. It is an essential marketing process that is of vital economic importance to a business. Product differentiation serves as a catalyst in a consumer’s purchase decision-making process. It basically sets one product apart from the rest and serves as the deciding factor in purchase decisions. Breaking Down Product DifferentiationThe product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. The different factors through which the process is implemented include: 1. Price differentiationProducts in the market are differentiated solely on the price factor. This establishes a price hierarchy for a particular product from lower to higher costs. 2. Non-price differentiationProducts, in this case, are differentiated by form, shape, feature, function, color, customization, durability, quality, services, etc. Types of Product Differentiation1. Vertical DifferentiationVertical differentiation focuses on differentiation in a product based on quality. In any market, a quality hierarchy exists for a particular type of product that ranks products of one kind from a position of low quality to the highest quality product. Essentially, vertical differentiation is aimed at differentiating the product in order to move up the hierarchy toward higher quality and use the trait as a competitive advantage to sell the product. 2. Horizontal DifferentiationHorizontal differentiation is when products are differentiated according to a specific feature. The differentiation can be about colors, packaging, shapes, flavors, etc. Advantages of Product Differentiation1. Provides economic benefitsProduct differentiation is economically advantageous to a company. It provides a reason for consumers as to why their product is worth investing in, as opposed to all the other substitute products available in the market. A successful differentiation campaign boosts sales for a company by a significant margin and gives it a competitive advantage in the market as to why they deserve a consumer’s investment more than the others. 2. Helps achieve a higher price pointIn addition, product differentiation helps a company operate at a higher price point just because of that additional benefit or feature introduced in a product. When that one distinct feature or difference introduced in the product makes it better than its substitutes, consumers more often than not perceive it to be worth the increased price. 3. Promotes brand loyaltyAnother implication of product differentiation is that very often, it brings brand loyalty into the picture. When a company efficiently differentiates its products, and a few essential products stand out, it usually brings out brand loyalty on the consumer’s part. This is because once a consumer is satisfied with a few products of a brand, they tend to just start buying other products from that one particular brand. The consumer believes that the company’s other products are as good and stand out just as much as the ones they use. Case Study: Blackberry in the 2000sIn the early 2000s, Canadian company Blackberry Ltd. stood out exceptionally through product differentiation. Blackberry was the only smartphone brand that offered an in-device instant messaging feature called BBM. It helped the company stand out significantly in the market. Related ReadingsCFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful:
What makes a product becomes different from other products?Product differentiation depends on consumers' attention to one or more key benefits of a product or brand that make it a better choice than similar products or brands. The elements of differentiation include product design, marketing, packaging, and pricing.
What is the term used to describe when products that are the same or similar are made to appear different and or better than those of their competitors?Product differentiation is a process used by businesses to distinguish a product or service from other similar ones available in the market. This tactic aims to help businesses develop a competitive advantage and define compelling, unique selling propositions (USPs) that set their product apart from competitors.
What are the 4 main types of product differentiation?Product Differentiation Types & Factors. Horizontal differentiation: Distinctions in products that cannot be evaluated in terms of quality. ... . Vertical differentiation: Distinctions in products that can be evaluated in terms of quality. ... . Simple (or Mixed) differentiation: Differentiation based on numerous characteristics.. What is the term for competitors which provides a different product?Definition: Indirect competition, also known as substitutes, is when two or more businesses offer different products or services and compete for the same market to satisfy the same customer need.
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