Definition: Development or incorporation of attributes (such as benefits, price, quality, styling, service, etc.) that a product's intended customers perceive to be different and desirable. Advertising and promotion of a product is based on its differentiating characteristics. Source: http://www.businessdictionary.com/definition/product-differentiation.html
Today, the market is crowded with similar brands, clamoring for the attention of customers. In order for their brands to stand out, companies strive hard to make them appear different from competing brands. This is product differentiation.
Product differentiation is an objective that a business may try to achieve through its marketing. Any business, must try to differentiate products from those of competitors, so as to gain a ‘competitive edge’ over them, thereby attracting more customers. This difference can be achieved by altering the product- making it better than that of the competitor’s or it can be ‘perceived’- such as a strong brand identity developed in the promotional campaign.
Need for product differentiation:
usually customers cannot tell the difference between competing products- hence the need to differentiate developing a competitive advantage
Focus and differentiation
A product may have a lot of attributes, but it is essential to focus on only few of the attributes. Eg: Volvo-safety, BMW-performance : but it doesn’t mean that Volvo does not perform or BMW is not safe. They have just focused on those aspects of their products. Therefore their products will be differentiated on that particular attribute. If a product claims to be good at everything, you run the risk of consumers not believing what you say, even though you may have all those attributes. If a product is focused: 1) more credible 2) customers will think that they are as strong in other areas.
What to differentiate:
Easiest way to differentiate is on price, but it is least effective as...