Product Differentiation: Definition, Types, Importance & Examples

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The markets these days are much more crowded and even more chaotic than it was ever before. On the other hand, the customers are happy to have more options to go with than they ever had before.

That is the reason why topping the competition has become something too important to miss for a business that aims for long-term existence.

The only 2 methods with which a product can differentiate itself are by-product differentiation and cost leadership. Price leadership is usually overcoming the competitor’s price of a product.

Product differentiation revolves around the specs or features of a product offering for product differentiation examples.

What Do You Mean By Product Differentiation?

Product differentiation or in simpler terms differentiation is a market procedure of distinguishing a product offering in comparison with the other similar products offered in the same market, intending to make it far more alluring to the target segment.

It usually includes explaining of unique product offering as the prime position and advantage it will offer to the target audience.

This can also mean that it is more of highlighting a product proposition to help look it more unique among the various other similar products.

Why Does Product Differentiation Hold Such Great Significance?

The rising competition has parted amid various contenders in the market hence helping with a clearer definition of product differentiation.

Hence making it very crucial for businesses of all types to have their customers perceived what they have to got to give to their customers.

Although a product survival in the dynamic market is significant due to the below-mentioned reasons:

Product Differentiation interprets the product features into advantages

1. It gets back to the universal question coming from the customer? How does it benefit me?

2. It offers the customers a strong reason to buy the product of a brand and become a regular customer forever concerning the examples of product differentiation.

3. Does result in a rise of re-order worth of a product.

4. It rises brand equity and brand loyalty among the customers, which is good for all kinds of brands and organizations offering goods or services.

5. Feature-based differentiation is crucial for all kinds of brands to safeguard their price from settling down to a substantially lower level.

Types & Factors of Product Differentiation

Product Differentiation relies on the customer’s understanding of a brand. It has nothing to do with what and how a brand perceives a product, what’s important is how a customer eyeballs a product. In total there are 3 kinds of product differentiation

1. Horizontal Differentiation.

Variance on the products which can be estimated in quality aspect. Healthy mineral water brands (drinking water companies) are a good enough differentiator for examples of differentiated products.

2. Horizontal Differentiation.

The difference in the product is not possible to estimate concerning quality. It’s more of a scenario where one would say the other product is far better than this one.

3. Mixed or Simple Differentiation.

This product differentiation is dependent on various features of a product.

Product Differentiators Attributes

1. Price 

For a customer to choose a product, the first thing he sees is the price. If the price is right, it will automatically trigger the desired target group to come and buy it. Also, it is a degerminator for products to be segregated from an ordinary product to a premium class product.

2. Features

Product attributes such as ingredients, size, shape, etc. are the major contributors to a product in a similar price range. They do offer a brand a helping hand to reverse or support their products and services.

3. Quality & Performance

A product that is of good quality will appear different from other regular labeled products. For example, a product from Titan cannot complete the features of a premium product like Rolex.


Several products are famous among others for being more dependable in comparison with various other products. And that narrows the chances of low profits of such product can be failing after some time.

5.Overall Appearance

This is a factor that plays the biggest role in desegregating the product from another species in the case of luxury products and fashion apparel.

6. Distribution channels

Distribution channels are something exponential in product offering and play a classic role in product distribution affecting the overall demand and supply of a product

7. Complexity

A product’s complexity is a major reason for a product and a crucial element that differentiates from a contender’s product, particularly in the technology sector.

8. Location

Product makers location, retailer’s location and company’s homeland is an important factor in segregating a product from contenders’ products.

9. Marketing efforts

This is the reason for the increase and overall enhancement of a brand’s product image which is a good enough product differentiator. Various other efforts in the marketing division play as an extra feature on the overall tactic of differentiating.

10. After-Sale Services

A decent brand and its products are differentiated by the after-sale services offered.

11. Services as Offering Add Many More Factors of Differentiation

The product’s delivery, whether on time, before time, or delayed delivery is the main differentiator of a supreme class product or an ordinary product.

Merits of Product Differentiation

Apart from being a crucial thing to exist in the dynamic market with fierce competition, product differentiators do feature the mentioned merits.

1. Gives rise to the overall value of a product

The product differentiator helps in a concrete reason to the buyers to pick a brand among all other brands available to choose from

2. Plays an important role in safeguarding high prices

Product Differentiation caters to the need of giving customers a good enough reason as to why the products are being offered at a sky-rocketing price in comparison with all the other products in the market available with similar features.

3. Helps a brand in non-price competition

Product Differentiation lets the organizations stand against other aspects rather than the price of competitors.

4. Creates and nurtures brand loyalty

A good product differentiator lets a company create and develop brand loyalty among customers across the globe.

5. Gives rise to no parallel competition or close substitutes

A stable enough product differentiator offers a tactic that may result in a customer’s understanding of a product which they may come to know later as there are no alternative products available at the moment in the market.

Demerits of Product Differentiation

1. Increase of pressure on the product manufacturers

A product differentiator is something that includes a subliminal volume of pressure on a product makes so to determine which element could turn up as the USP for the specific product or service.

2. Product Differentiation can cause a hike in the prices

Many times product differentiator includes the overall overhead costs such as light, transport, production, wage costs of a product for delivering the goods to the end consumers.

3. Hiked revenue is not assured

Any product differentiator does not make any claims or assurances of greater sales volume or increased income as a company can come tumbling down in interpreting whether a customer would like certain USPs of a product or no.

Final words

The product differentiator is a very broad term to be covered in this article hence this was the most essential and critical information based on the subject header along with the examples of product differentiation.

In this article, we gave to the definition of product differentiation along with product differentiation examples.

I hope this article was helpful to you and if you have any examples of differentiated products then you can mention them in the comments down below.

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