Product differentiation is the process of identifying the distinctions that exist between goods and services that are intended for consumption by the same segment of the consumer market. The idea behind this approach is usually to convince consumers that a particular product is able to fulfill all the functions associated with the competition, but to do so more efficiently and possibly at a lower cost. As part of the touting of the superior quality of the product, the advertising may also identify additional functions that the product can provide that are not offered by the competing products.
It is important to note that the process of product differentiation relies heavily on creating the desired perspective among consumers. While there may be no essential difference between the functions and quality of a given product over the products offered by the competition, the idea is to create a sense among consumers that there are compelling reasons to consider a given product more desirable than the rest. A number of different tactics can be used to create this perception, while still offering the customer some type of value added incentive.
One approach that is common in product differentiation is to use packaging that is perceived as being more user friendly. For example, a beverage company may package its products in containers that are designed to store comfortably on the shelves built into a standard refrigerator door. If the competing products are of a size and design that require they take up more space on the interior shelves of the refrigerator, consumers who wish to make the most of the available space within the appliance may find this a good reason to purchase what they perceive is a more space efficient product. This is particularly true if the consumer perceives that this space efficient product is of equal quality to the competition, and costs no more money.
At times, the process of product differentiation involves marketing a product in a manner that convinces consumers that it can be used in more situations than competing products. For example, a glass cleaner that is marketed as not only cleaning window glass but also disinfecting metal surfaces and kitchen countertops is likely to attract the attention of consumers who would rather purchase one product rather than buy three different products to manage different household cleaning tasks. While other products on the market may be capable of fulfilling the same round of functions, only the product that actively advertises these functions will stand out from the rest.
True product differentiation does not involve the use of false advertising to attract and maintain customers. In order to retain that consumer base, the product must successfully live up to the advertising, and provide every value added incentive that is touted. Should the product not deliver on those claims, consumers will quickly turn their attention to other products that can fulfill their needs.
