Product Differentiation

Companies manufacturing products which satisfy the same need have to come up with a certain distinguishing factor for their product to be recognized. This is where companies come with product differentiation strategies based on minor unique details, which will ensure their product is etched in the minds of target consumers.

What is Product Differentiation ?

The definition states that it is the process by which a product is distinguished from others, so that it appeals more to the target audience. Other than distinguishing the product from its competitors, this process should ensure the product is distinct from all other products the company offers.

Product differentiation gives the product or service an edge over rival products. It highlights unique aspects of the products and also generates value for the product in the eyes of the buyer, which should be any manufacturer's ultimate goal. When the buyer perceives, a difference is when he will remember the product and buy it, thereby resulting in higher sales for the company.

Product Differentiation Strategy

The challenge companies face in creating product differentiation is to come up with a strategy which not only creates value for buyers, but also makes it difficult for rival companies to emulate. Whatever the company does to achieve this can be termed as its strategy.

Product Features
By modifying the basic objectives behind the product or service being sold, the manufacturer can differentiate the product from it's competitors.

Linking Functions
A way to differentiate products is to link together two functions of the same firm. An example of this could be linking the sales function with the company's service function.

Timing
While entering a new product in the market, it is crucial to do so at the right time to help create the differentiation and positioning at the time of launch. The new entrant gets the first mover advantage when the new product comes in before any rival company comes up with a similar product.

Location
Another aspect which could assist in creating product differentiation is the location of the firm. The closer the firm is located to the target consumers, the more advantages it has over other competitors.

Product Mix
The total mix or variety of products sold by a firm can also be a reason for product differentiation. If a consumer is buying a laptop from a particular brand, he would be more inclined to purchase laptop accessories of the same brand, rather than going for than other brands. Also, consumers prefer buying a variety of goods from one particular location rather than going to different places. Thus, stores selling a variety of products under one roof are better off than stand alone stores.

Links With Other Firms
Product differentiation could also be a result of links between different firms, services or products. There is a link between mobile handset manufacturing companies and service providers or automobiles and insurance companies.

Reputation
A firm's reputation and goodwill can be a vital factor in this. It takes time for the company to get to a position where it has built itself a wonderful reputation in public, but once there, there is no looking back. The best way a company can create an outstanding reputation is by providing consumers with top quality products or services, to give them a memorable experience.

Product Customization
Certain products are customized for selling consumers what they exactly want. A good example here would again be a laptop manufacturing company, which provides customized laptops for all its customers where they get to decide what they want in their laptops rather than going with whatever the company has to offer.

Packaging and Advertising
Product differentiation can sometimes be done without modifying or altering the product or its features. This can be done by adopting an attractive or unique packaging, or by opting for a unique advertising campaign which registers itself in minds of the customer.

Distribution Channels
There are few products which create a differentiation on basis of their distribution channel. An example here would be that of soft-drink manufacturers. They distribute drinks throughout the country through a chain of bottlers. The company sends the main ingredients of the drink to the bottlers, who then add carbonated water and pack the drink for eventual distribution.

Service
The amount of service and support provided by manufacturers can also create a product differentiation in the market. Certain manufactures have developed their own after-sales service centers and pride themselves in providing the best possible service to customers.

A successful product differentiation strategy will shift the competition of the product from price to other non-price factors. This helps the company to strengthen its position in the market as an increase in sales is the direct outcome of a good product differentiation strategy and execution.