Product Differentiation in Marketing: Examples, Strategies & Definition

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Lesson Transcript
Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and is currently working on his PhD in Higher Education Administration.

Few, if any, businesses sell a product without any competition. In this lesson, you'll learn how successful companies set their products apart by differentiation. After the lesson, you can assess your understanding with a short quiz.

Product Differentiation Defined

Product differentiation is a marketing strategy whereby businesses attempt to make their product unique to stand out from competitors. Businesses do this to gain an edge in industries where multiple competitors produce similar products. There are other methods businesses can employ to gain that edge, like pursuing a low-cost strategy and advertising, but while those are legitimate marketing strategies, they are different from product differentiation. Product differentiation means that some feature, physical attribute, or substantive difference exists between a product and all other alternatives.

Examples of Product Differentiation

You don't need to travel far to see product differentiation at work. A trip to your local grocery store will provide a number of examples. Look in the cereal aisle for some bran flakes and you'll likely have two options - generic bran flakes, probably packaged in fairly plain packaging, or Wheaties, the 'breakfast of champions.' What is the difference between the generic brand flakes and Wheaties? Very little. But Wheaties is differentiated by its packaging.

Another good example of product differentiation was in the early 2000s, when Google began taking over the search engine business on the Internet. Before Google, there were a variety of options to use if you had to search for something online. While most of those search engines would give you the same, adequate results, they also all followed the same presentation, which at the time was pretty much just a list of web pages among some busy advertisements, news links, and images.

Google's differentiation strategy was twofold. First, simplicity. Google was minimalistic. When you went to Google.com, you saw two things: the name 'Google' and a box where you could type your search term. Users loved the design of it. The second differentiation was the algorithm used to find the results that would be returned to the user. This would come to be a very important differentiation, but one that the end user wasn't always aware existed.

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