What is product differentiation and why is it one of the most effective marketing tools of the 21st century? Here are a handful of examples of what works in this regard and makes you profitable every day.
The history of marketing is product differentiation based on examples. Coca Cola-Pepsi, Burger King-McDonald, Microsoft-Apple. These are famous couples whose marketing is largely based on mutual differentiation.
There are three parts to effective competitive differentiation:
- effectiveness of action,
- closeness, relationship with the client,
- quality of products.
Each of them can be studied separately or in relation to each other. Research by the MBLM agency conducted after interviews with 6,200 customers from three continents shows that, for example, in the field of proximity and customer relations in 2019, Disney, Apple and Amazon were the highest in the world. Presence in the first places in such rankings is not given once and for all, and constantly ranking high requires understanding what the differentiation of the product is about and its constant implementation.
What is product differentiation?
The simplest answer is - differentiation it is an activity thanks to which significant differences between the products of one company and those offered by the competition will be highlighted. Additionally, it will help to understand what it is about to pay attention to the parameters, which may be different. These are, for example, an image, communication channels and sales, durability and more. You can find several dozen of such distinguishing features. Professional marketing strategy aims to select the relevant feature and to conduct effective product differentiation.
How to do it? Even in the sphere of symbolism or ideas, distinguishing its products from others. However, it is important that it has the following features and is:
- important - from the consumer's point of view;
- available - for the customer to use it;
- beneficial - we emphasize the positive qualities of the product;
- safe - so that the client does not have to focus on risk assessment;
- profitable - the discriminant should be translated into a specific value for him;
- clear - the question of communication is whether the client will understand the difference
- distinguishing - that can be described, compared to other products.
When is it worth using product differentiation?
Product differentiation is one of the basic methods to increase and sales support. Properly conducted, it will work regardless of the scale or market situation. When there is little competition, this is sometimes the only way to accentuate the difference (as in the famous example of two nearly identical sodas). When the market is saturated and there is a lot of competition, it is also thanks to the awareness of what the differentiation of the product consists in that you can stand out from the crowd. It is also worth remembering that this process may occur spontaneously on the basis of factors beyond the entrepreneur's control as a result of, for example, the actions of the competition or the effects of random events. So let's be the one to set the tone for brand communication before it gets driven by chance.
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Product differentiation - examples
Product differentiation takes place in the sphere of impressions and ideas or may be related to specific features of a given thing or service. The most famous example is the difference between Coca-Cola and Pepsi Cola. The real differences in taste are symbolic or imperceptible to the average consumer. This product differentiation is responsible for the fierce battles between supporters of Cola or Pepsi, and it is it that is ultimately responsible for the market position of these brands.
In this case structural characteristics the drinks are identical: water, sugar, carbon dioxide and the rest of the ingredients. So the advertiser focuses on functional characteristics, so on what the customer receives through association with a given brand (family holidays, carefree fun, youth, etc.). This strategy might not work without proper external characteristics: labels, advertisements and bottle shapes.
Product differentiation - what are the risks associated with it?
Finally, it is necessary to mention the risks that may be associated with product differentiation. It is worth noting here that these are not always real problems, but many entrepreneurs are certainly afraid of them when considering whether it is worth getting involved in product differentiation. The first fear is admitting weaknesses or showing defects in the product. Because in differentiation strategy needs a strong distinguishing feature, sometimes it is done on the basis of contrast, comparisons or opposites:
- The second most frequently chosen carrier in Europe
- The most intimate pizzeria in Warsaw
- The only courier company that delivers parcels overnight.
In the opinion of business owners, product differentiation can be limiting. In reality, however, well-chosen it responds to the needs of the market and complements the offer of other companies operating in the same segment and using other distinguishing features (or not using any differentiators). Sometimes it means de facto giving up some opportunities or profits. Then it is worth taking care of first marketing audit and a business plan that shows that focusing on a narrower segment will actually pay off.