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What is Product Differentiation?

 , January 13, 2016 updated on January 14, 2023
Product differentiation is a product's unique value on the market. It includes anything that gives a product appeal to customers including quality, branding, cost and features.
A way to think about differentiation is in terms of the crowded shelves of a supermarket. If you look at a particular section, such as coffee, you'll see that each product stands out in some way such as branding, organic certification, country of origin, flavor and price. Buyers for a supermarket will typically only buy products that offer something unique to their shelves.
Establishing strongly differentiated products and services is considered key to revenue and margins in many industries. In a commoditized industry, establishing differentiation is difficult or impossible as customers see commodity products as all the same. Industries with strongly differentiated products such as luxury goods tend to support high margins.
Overview: Product Differentiation
TypeMarketing
Economics
DefinitionThe unique value of a product relative to other products on the market.
Related ConceptsCommodity
Brand Identity

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