The product management guide

Aha! helps product managers get their mojo back

What is product differentiation?

Product differentiation is simply the characteristics that define your product and make it unique to customers. You may hear it called the unique selling proposition or abbreviated as the USP.

Why is product differentiation important?

For brands, the field of competition is more crowded than ever. When faced with too many choices, consumers can be overwhelmed, and often walk away rather than make a difficult decision. That is why it is imperative to find a way for your product to stand out and be considered uniquely valuable.

You want it to be crystal clear to your customers what you are offering and how your product compares to competitors. If you have other products, you also want to make sure each product has a clearly defined identity to eliminate confusion for customers. Creating a differentiated product which appeals to your target market can help to build your competitive advantage over other brands.

What are some ways to differentiate your products?

You do not want to be different just for the sake of being different. Instead, consider what matters most to your customers, and let that drive your decisions on how to differentiate your product. Your product differentiation should arise after careful study, and should be part of your larger strategy for the product. With that said, here are some common ways that a product can stand out:

Benefits

What value can customers expect to gain from using your product compared to others? What problem is the product going to solve? How is it going to make their lives better? For example, yours may be the only brand offering a mobile app that saves actual time from an activity that parents must do (but do not like) every day.

Design

Does the product have a different design that distinguishes it from the rest? For example, your product is sleek while your competitors' offerings appear clunky or dated. This distinction may help customers connect with your brand. For example, think about the modern design sensibility of the Nest thermostat. Instead of copying the rectangular shape of other thermostats, the company opted for a simple circle with an easy-to-read, color-changing display. This fresh take on an old idea helps the company sets their product apart and gain a competitive advantage.

Price

Is your product priced lower or higher than your competitors' products and other products you offer? Your price should reflect the overall value that you are offering in the product. For example, you can justify a higher price if customers recognize that the product offers unsurpassed quality. This is how a luxury brand like Ferrari can command a top asking price for their cars. Ask too low of a price, however, and customers may not see your product as truly valuable.

Quality

Does your product simply work better than your competitors' products? Do you offer some functionality that your competitors do not? Can users expect the product life to last longer than other products? Your product's competitive advantage may indeed prove to be superior construction and dependability.

Customer service

Your product may be similar to others in many ways. However, you can differentiate your whole offering — and build your competitive advantage — by assembling a stand-out support team and earning a reputation for being ultra-responsive to customers' needs.

For example, the #1 core value for Zappos is "Deliver wow through service," and they succeed — even though Zappos does not always have the lowest price. A customer who orders by midnight may receive their package by the next morning. This emphasis on customer service pays off — judging by the fact that 75% of their sales are reportedly from repeat customers.

Remember, the way you differentiate your products should not be an arbitrary decision, or a knee-jerk response to whatever your competitors are doing. Rather, your product differentiation should arise from your higher-level strategy for your product and your business.

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