What is product differentiation?
Product differentiation means making a product stand out from similar products so that people who are likely to buy that product will want to buy it. Companies make their products stand out from competitors and other goods in their catalogs.
It’s not enough for companies to make a “different” or “better” product; they must also let potential buyers know the benefits.
Due to this, differentiating products involves many business areas and tasks.
- It is making new products. To be different, you must make a product with traits not found elsewhere on the market. Some things that set a product apart are its design, performance, durability, price, and features specific to a business or field.
- The business. The marketing team’s job is to get a product in front of the right people who will buy it and explain what makes it valuable. Marketers write copy, make ads, and choose the best ways to get their products to customers by using what makes them unique.
- They are making sales. Differentiating a product from the competition and other goods in the same company is very important during sales. When sellers can match customers with the correct goods and explain their value, they can get people to buy them.
- Happy customers and keeping them. Customer service and support after the sale are two ways companies can set their goods apart. This can include many services, including setup, repair, training, customization, updates, etc.
It’s not enough to make a better product than the competition and sell it that way to differentiate your business. It also helps sales and marketing professionals find the customers who will get the most out of their goods, which keeps customers coming back and makes everyone happier overall.
Synonyms
- Product differentiation strategy
- Product positioning
Why product differentiation is important
By making their goods stand out, companies can get a more significant market share and give their customers more value. But being too different or different in a way that doesn’t meet customers’ wants can be expensive and complicated to fix.
Pros of Making Products Stand Out
Being different helps businesses:
Get a more significant share of a more specific market.
When the marketing and sales teams can focus on a small group of buyers, the sales pipeline consists of qualified leads that will turn into sales.
Delivering unique value will help you get new customers and keep the ones you already have.
That old business saying, “You don’t have to be everything to everyone, but you have to be everything to someone,” says it all about product differentiation: companies that tailor their features and messages to specific groups of customers lose fewer of them to competitors and gain more because their products are better suited to those groups.
Make more people aware of your brand using product features, style, and messaging.
As a result, product marketers who can make their goods stand out in the market are better at making their brand known. Businesses also get free advertising through word of mouth when they solve problems in a particular field.
Improve how their customers feel.
When a business learns more about its customers, the experience of those customers gets better. Because they sell a unique product to people in the same market group, they can shorten the sales cycle and make planning their ongoing support efforts easier.
Use product-led growth to your advantage (PLG).
When a company has users in the same business, it’s easier to grow through product-led initiatives. Each potential customer is more likely to connect with the company’s content, and people in the same field (such as strategic partners, influencers, and advisors) are more likely to promote the product.
Bad Things About Differentiating Products
Having different products is usually a good thing, but companies should be aware of these risks:
Getting new money is not a given.
Customers may not find the qualities of a helpful product, especially in a competitive market, and choose to look for another. If a business wants to make more money, it needs to keep looking at the market and changing how it differentiates its products.
Differentiation can cost resources.
Companies don’t have a lot of time or money, so they should focus on projects that set them apart and will bring in the most value in the shortest amount of time.
Differentiation that goes too far can turn people off.
The MAYA principle says that a product that is too far ahead of its time or too new for its target market won’t be adopted. Businesses need to find the right mix between coming up with new ideas, making their products stand out, and making products that people already know how to use.
The product’s value may seem to go down.
Differentiation efforts could hurt price optimization because customers may think they will pay more or less than expected for a product with unique features.
Departments Involved in Making Products Stand Out
Creating New Products
Developers use information about customers, like how the product is used, cohort analysis, usability testing, and customer polls, to make a product idea come to life.
Product makers who are involved in the differentiation process do a few essential things:
- Coming up with ways to be different based on market study and customer feedback
- Making a road map for the product
- Adding and improving features and functions of a product
- Making prototypes and beta tests, getting feedback from early users, and making any changes that are needed
- Keep gathering and analyzing data on how the product is used to improve it after launch.
Science and Engineering
Engineers work closely with the product manager and the development team to turn ideas for products into natural products that people can use.
Engineering teams are responsible for several essential tasks, including:
- It is developing and making software (or hardware) solutions that match the product development team’s ideas for the product’s concept, features, and unique selling points.
- Checking the quality and usefulness of the product design
- In software engineering, putting the software into use, keeping an eye on how well it works, and fixing problems that keep coming up with the script.
In actual product engineering, this means ensuring the product’s design can be made on a large scale and meets safety standards.
The main difference between product development teams and tech teams is what they work on. Product engineering focuses on the practical parts of design and prototypes. In contrast, product development is a more general term that includes all project stages, from the idea to the finished product.
Engineering looks closely at how well a product works, how much it costs, how safe it is, how comfortable it is to use, and other things that make it better and stand out.
Dealing with
The main goal of a marketing plan is to get people likely to buy the product to react to its value and unique qualities.
When it comes to making a product stand out, the marketing team is responsible for:
- Making videos, website writing, blog posts, and white papers that make the product look like the best way to solve the problem of the target customer
- Come up with a way to get that content to possible buyers (e.g., SEO, SEM, social media) and get them interested.
- Making buyer-enablement material (like case studies, tutorials, and documentation) specific to the product to get customers to buy it.
- Looking into competition and customer feedback to improve how the product is positioned in the market
- Coming up with pricing plans that take price elasticity into account and show the value of the product
- Managing the strategy for launching the product by making a schedule of tasks and due dates for each team member involved
More sales
Marketing and sales are working together increasingly, but sales teams are still in charge of seeing a product through from idea to cash flow.
As part of attempts to make products stand out, the sales team does the following:
- Putting sales leads into groups based on how likely they will gain from the product’s unique features and USPs.
- Making the buying process customer-centered so that buyers can find the correct goods to solve their problems
- Giving customized sales demos that show the prospect the benefits of the product
- Giving everyone involved in the sales process the correct information
- Working with the product’s pricing plan and making purchases that are hard to understand
- Gathering and analyzing data to keep an eye on sales success
- Using sales estimates to guess what people will want in the future
Help for Customers and Success
A strong plan for differentiating a product is incomplete without teams that help customers be successful.
Their job is to build long-term connections with customers by helping them with their problems, giving them helpful information, and getting them loyal.
A product plan for customer success teams has these parts:
- Processes for bringing new customers on board, such as implementation, training, and adoption across the whole company
- Making custom help plans for each customer
- Helping with technology issues and fixing them when needed
- Keeping in touch with customers by sending product updates, giving them help after the sale, and sharing best practices
- Getting customer comments on the product to help shape the product roadmap and market positioning strategy
- Keeping an eye on how customers feel and drawing attention to problems that keep happening with the product
Differentiating Products in Different Ways
Three product differentiation strategies work well: horizontal, vertical, and mixed.
Differences in the horizontal plane
Things that differ about a product but don’t have to do with its price or quality are called horizontal product differentiation.
When people choose between horizontally differentiated goods, like Coca-Cola and Pepsi or iPhone and Android, it usually comes down to personal taste.
People often use horizontal product differentiation in full markets, where customers have a lot of choices and like certain goods because of how they look or the brand’s reputation.
Some examples are
- Style (like color, shape, or size)
- Creating a brand
- What the customer thinks the item is worth
- Programs for Social Responsibility
Differences in height
The vertical product difference is about making a better product based on price and quality. It’s the old “better mousetrap” idea: if your product is better than others, people will gladly pay more. A clear winner would be if all goods were priced the same.
In vertical differentiation strategies, the features of a product are carefully chosen to meet the needs and wants of each customer. For example, branded goods differ from generics, and low-cost tools differ from enterprise software.
Here are some examples of vertical product differentiation:
- Prices (for example, sales, deals, and coupons)
- The quality of the parts or materials
- Functions and features
- How well does the product work?
- Services to help
Differentiation with a Mix
The third type, mixed difference, mixes the first two. It helps businesses find the best balance between quality and price, making a product that buyers want without losing money.
It also takes into account the many factors that go into making more complicated buying choices. Someone who wants to buy a car might care about speed and gas mileage, but they might also care about how the car looks, what extra features it has, and whether a sale is happening.
To determine which factors are most important to customers, you need to study their wants and needs to differentiate mixed products.
Examples of Differentiating Products
To learn more about how to differentiate products, consider the following three situations:
A company that makes soft drinks (Horizontal Differentiation)
Company X’s soft drink brand has many flavors, from the primary cola flavor to more unique ones like peach or cinnamon. Each flavor is made to suit a different taste. The quality of their drinks is the same; what makes them different is that they all have different flavors that appeal to different types of customers.
There is a lot of information about soft drink prices and quality, so Company X works on making its brand stand out and connect with customers. Their advertising efforts focus on their flavors’ fun and exciting parts, and they use seasonal ads to connect their drinks with special events.
Brand of high-end clothing (Vertical Differentiation)
Company Y is a high-end fashion brand that makes elegant clothes and accessories. Customers who like finer things will want to buy their goods because they are carefully made with high-quality materials and tiny details.
Company Y charges more for its goods because its product management team works closely with small luxury manufacturers to get the best materials. This lets it collect the value that comes with the higher quality.
To get customers who know how valuable their expensive clothes are, the marketing team creates campaigns highlighting their clothes’ features, such as the high quality of the materials and the skill that went into making them.
CRM Software Provider (Mixed Difference)
Digital marketing companies can buy CRM software from Company Z. It was made to handle one-time sales and long-term client relationships, which are popular in digital agencies.
To meet customer needs, the product development team constantly adds new features and functions to their software. For example, their software now integrates with famous marketing platforms and has automated workflows, performance reporting tools, and an add-on for project management software.
Prices at Company Z are also tiers that change based on what the customer wants and their income. The pricing plan was carefully made to work for customers whose businesses are at different stages of growth, from small start-ups to larger companies.
The marketing team makes material that shows digital marketing firms how to use CRM to streamline their internal processes and keep clients engaged.
The sales team at Company Z specifically targets digital marketing firms in the US with over 20 workers who make over $10 million in MRR. This is the exact type of customer for whom the software is designed.
How to Come Up with a Strategy to Set Your Product Apart
Learn your market.
There’s no way to know “for sure” how customers will react to a product, but competition analysis and customer research can help make a plan to set yourself apart as predictable as possible.
To begin, you should learn about the business and find out what customers need, want, and like by doing the following:
- Talking to people and holding focus groups
- Sending out polls
- Looking at the goods and prices of competitors
- Looking at what customers say
Before you roll out new features to your customers, you should try them on small groups of people to get to know your market.
Describe what makes your product unique.
Once you know what features your customers (or possible customers) want, you need to figure out how much they’ll cost and how big your target market is.
If you think about it, each customer needs its group of people. Then, ask yourself these questions:
- Is this group of customers big enough to make it worth developing a product for?
- Is the cost of making this feature or product cheap enough for me to make a profit?
- How does the feature affect other essential parts of the product?
There will probably be a lot of features that your customers would like, but it’s important to only spend money on the ones that make business sense.
Create a sales and marketing plan based on how you’re different.
To ensure everything is in sync, marketing, sales, and product development should all use the same information. Using what you’ve learned, the following are parts of marketing and sales strategies:
- Figuring out how to explain a product’s many perks and ways it’s different
- Making buyer profiles
- Making strategies that are specific to each group of customers
- Making sure sales reps know how to talk about the benefits of different features in terms of what customers want
- For marketing, try out different platforms, messages, and campaign parts; for sales, come up with new ways to make sales;
People in sales and marketing should work with people who make products to determine what specs and features buyers care about the most. If not, they won’t be able to properly talk about how valuable the product is.
