We're going to get personal for a minute.
Before you run away, hear me out. I'd like to introduce you to … Billie.
Why am I introducing you to a body care brand? Because they've mastered the art of product differentiation.
While personal care might seem like a standard part of your daily routine, Billie strives to bring out the 'magic in the mundane' by making high-quality and affordable body care products.
Billie's co-founder, Georgina Gooley, said, "I really want to try and carve out our own brand and our own following and not try and replicate what another brand has done, because we are trying to be different."
The product is differentiated from typical direct-to-consumer body care brands by focusing on women first, combatting the pink tax, providing premium products, and making the future brighter for all women. This strategy has helped the company realize monumental success and develop a recognizable brand with a positive reputation.
So, how can a differentiation strategy work for your business? Let's demystify product differentiation.
What is product differentiation?
Product differentiation refers to the strategy used by businesses to highlight the unique features and benefits of its product or service to separate it from competitors. The marketing team communicates these unique qualities through their campaigns and promotions. And the sales team can use them to demonstrate the product's competitive advantage.
Also known as a differentiation strategy, product differentiation is a method for companies to make their products stand out and grab the attention of consumers. This helps the company develop a strong brand that potential customers will recognize. And it increases the likelihood they'll pick your product over a generic or un-differentiated product or service.
Businesses that make product differentiation work for them have the following qualities:
- The resources to create high-quality products or services
- A strong research and development team
- Marketing and sales strategies that communicate the benefits and competitive advantage of the product or service
The differentiation strategy a business chooses will depend on its industry, competitive market, and the products or services it's selling.
Types of Product Differentiation
Depending on the type of strategy you choose, there are specific areas where you can differentiate your product.
- Brand image
- Marketing and promotion
- Distribution channels
- Post-sale support
Advantages and Disadvantages of Product Differentiation
Before pursuing a product differentiation strategy, it's best to review the advantages and disadvantages and consider how they'll impact your business.
Advantages of Product Differentiation
1. It creates additional value.
Product differentiation will give your prospective customers added value. This value can either come directly from the product and service, or from the brand perception.
2. It develops brand loyalty.
Every time people see your products on store shelves or in an online ad, they'll know exactly what your brand represents. And they'll be more likely to choose your product over the competition.
3. It allows businesses to compete in different ways.
With product differentiation, companies have the ability to compete in areas other than price. They can be innovative in style, quality, features, etc. It's up to the business to decide which area of differentiation will work best for their target markets.
Disadvantages of Product Differentiation
1. Revenue increases are not guaranteed.
Will consumers find value in the unique features your product provides? A differentiation strategy doesn't necessarily guarantee that consumers will find the value that separates your product from other, standard options.
For example, if your product is more expensive than the competitor selling the standard product, and the consumer doesn't see the added value in your product, they'll likely choose the cheaper option.
2. The offering's perceived value can decline.
As consumers become savvier and technology and products advance, the differentiation of your product might no longer provide value to customers. You should consider how long your differentiation strategy will last and if it will need to be modified eventually.
3. It can strain resources.
Pursuing a differentiation strategy means a lot of time, energy, resources will be spent to develop a product that sets itself apart from the competition. This can put a burden on research and development teams, product manufacturers, and even your profit margins. These effects are felt more by smaller businesses who have few employees and limited resources.
Product Differentiation Examples
Differentiation strategies can be used in a variety of industries and business types. Here are a few product differentiation examples of businesses that have made the strategy work for them.
Main competitors: Fleetwood, Jayco, Winnebago
There's a retro mystique about Airstream's RVs. They're silver, streamlined, and highly recognizable on the road.
The company sets its RVs apart from the competition by focusing on quality and their value increases with time. Higher quality means lower maintenance costs and higher resale value. Plus, they're known to last for generations:
"Since the 1930s, Airstreams have been handed down from generation to generation, passed on to family members, friends, or new adventurers -- and they look just as great in their 30th year as they did in their first. That’s the quality standard we hold ourselves to."
Airstream's brand is further developed through its heritage, which builds trust with potential customers and highlights the company's success over the years. With the tagline "Live Riveted," Airstream inspires people to get on the road and travel with an RV.
Main competitors: Under Armour, Adidas, Reebok International
What separates Nike from the competition? Branding. The company positions itself in the market as an innovative company that creates high-quality sports apparel and shoes.
The company works with high-profile athletes to wear and promote Nike apparel. A few of these athletes include Serena Williams, Michael Jordan, Cristiano Ronaldo, and more. This attracts new (and returning) customers because many aspire to be just like their favorite athletes.
Nike creates new and innovative product lines and creates buzz and excitement for the product launches through its promotions. Not only does this pique the interest of new customers, but it also keeps existing customers coming back for more.
Main competitors: The Body Shop, Origins, Sephora
Lush stands out from other cosmetic brands due to its focus on fresh, handmade cosmetics. This is something that isn't often done by generic cosmetic brands, and it's what differentiates Lush from the competition.
Its message is another area where Lush stands out from the crowd. Their target customer values social responsibility, and the company takes it to heart. All the products are made using natural, vegetarian ingredients, reusable and recyclable packaging, and without animal testing.
And each visit to a Lush store offers a unique experience. You can test out products and have your questions answered by impeccable, friendly store associates. Each aspect of Lush's differentiation strategy makes it the recognizable and well-loved brand it is.
These examples show us how a well-planned product differentiation strategy can set your business and brand apart from competitors. For even more product differentiation examples, check out these companies who brilliantly differentiated themselves from the competition.
And if you're ready to start a business of your own, use these small business ideas for inspiration.
Originally published May 2, 2019 7:30:00 AM, updated January 21 2020