How to Differentiate Your Product to Stand Out From the Competition

Do you have a favorite go-to restaurant when new friends come into town?

Whenever my friends and family come to visit me, I recommend they go to Molly’s Diner. Here’s why:

1. A lot of good food for the price. The price I pay for a six-egg omelet at Molly’s is the same as a three-egg omelet everywhere else.
2. Friendly waitresses who get to know you. If you get the same waitress at Molly’s two or three times, they begin to get to know you on a personal level.
3. Never leave hungry. I’ve tried almost every item on Molly’s menu. It’s rare for me to leave wanting a little more. (And I often find myself not needing to eat lunch that afternoon too).

There are 100’s of restaurants in Spokane. But these three points of differentiation keep me coming back as a loyal customer. Not to mention there’s the value of how often I spread the word to others.

Understanding what makes your product different will help you get new customers. In time, it becomes easier to spread the word because they understand what makes your product unique.

What Is Product Differentiation? Why Is It Valuable to Invest in Differentiation?

Related article: Customer personas

Let’s assume for a moment your product was exactly the same as 99 other products. These products have the same price, same features, the same positioning and messaging… everything is the same.

What are the odds that someone will buy your product?

The odds are 1-in-100, or 1%.

Naturally, a decision rarely comes down to random luck. The goal of differentiation is to increase your odds above a random luck-of-the-draw.

Here’s my definition of product differentiation:

“Product differentiation is the process of distinguishing a product from competing products to make it more attractive to a specific customer.”

What Will Happen When Product Differentiation Is Successful?

Related article: Competitive advantage

When successful, product differentiation will create a competitive advantage. 

How specifically does differentiation add value to your business?

1. Helps defend higher prices: Differentiation gives your customers a clear reason why you charge a higher price.
2. Prevents commoditization: If your customers view all products as equal, then the only way to win is with a better cost and convenience. Differentiation gives you new opportunities to make your product the best selection.
3. Creates brand loyalty: Differentiation will motivate a customer to buy from you. Since your product excels in this area of differentiation, it also prevents a customer from switching to another solution.
4. Makes word of mouth easier: As shared in my story about Molly’s, your customers will know why they should tell their friends about your product. 
5. Creates a belief there are no close substitutes: If your product appears to be the only solution, then your customers will be less likely to consider an alternative.

Now you are starting to see the value of differentiation. So how do you differentiate your product in a way which increases sales?

How Do I Differentiate My Product?

Related articles: Voice of the customer, value proposition, unique selling proposition

There’s a difference between: 

1. Differentiating your product to increase sales.
2. Differentiating your product which just makes you look... weird.

For example, let’s say you launch an app branded as “The Flower Arrangement App for NFL Players.” It would surprise me if this app would make the “New and Noteworthy” section of the app store anytime soon.

As ridiculous as this sounds, this happens when entrepreneurs get “creative” rather than listening to their customers.

Here’s how we differentiate products at Growth Ramp, step-by-step:

1. Talk to your customers. Get on 20-30 phone calls. Ask them why they bought your product, what competing products they considered, what they like about the competition, and what they wish were different. Take notes of every word your customers say to you (or at least 80% of it). Their language will make step 7 a breeze.
2. Synthesize your results. What are the reasons customers choose to buy from you rather than the competition? Write down a simple 3-to-5-word summary for each difference. This will help you quickly pick up how you should differentiate yourself.
3. Survey the market (Recommended). You can use a tool like Pollfish to survey a larger sample of your target audience. This will allow you to confirm how big the issue is for potential customers in your market.
4. Do competitive research. List out every competitor by doing Google searches (“$COMPETITOR alternatives”), browsing Reddit, and looking up articles on the competition in Wikipedia.
5. Choose how to differentiate your product. Now that you know what the competition is doing, go back through your synthesis. Look for emotional words such as “hate,” “afraid,” “anxious,” “overwhelmed,” “feeling stupid,” “getting stuck,” or “wasting time.” These words signal there’s a high pain your customers want you to solve.

Now that you know how to find your points of differentiation, let’s look at how to put this into your positioning strategy.

What Are the Most Common Differentiation Strategies?

All differentiation falls into two categories:

1. Vertical differentiation.
2. Horizontal differentiation.

Vertical differentiation happens when feature differences are objective. 

Let’s pretend you want to buy a car. The two cars you’re looking at are the same besides one feature. They have the same price, color, shape, condition, and mileage. But one car provides 15 miles-per-gallon (MPG) of gas and the other car provides 30 MPG. 

Which car should you buy?

In theory, you should buy the car with 30 MPG.

Vertical differentiation is the quality difference between your product and a competitor’s product.

Horizontal differentiation happens when feature differences are subjective. 

Every horizontal point of differentiation is from a customer’s preference. 

Using the car example again, if two cars have different colors, the cars should not have a quality difference. A car doesn’t go faster by painting flames on the sides. It may cause the customer to react differently, but it doesn’t change the function of the car.

To be clear, picking the horizontal differences which serve your customer’s needs will still increase sales. Just because a feature is subjective doesn’t mean it isn’t valuable.

What Are Some Examples Product Differentiation?

There are many opportunities to differentiate your product. Here are some common ways you can do so:

Price Differentiation:

The price is the most common way entrepreneurs think of to differentiate their product. Without considering their differentiation, price is often the first place entrepreneurs will change without considering the potential problems. Price also signals a product's quality. 

Example: Louis Vuitton products are premium priced. To further communicate the premium price, their products are rarely on sale.

Marketing Messaging:

The brand messaging you use in your marketing influences your brand image. You may have a different product, but you also need to communicate that difference in your messaging (your USP). The marketing channels you use to communicate your message will also change the perception of your brand image. 

Example: How-to videos on YouTube will communicate a different brand image than a written Facebook ad.

After-Sales Service Differentiation:

Many companies finish their service once the transaction is complete. Quality after-sale services increase customer trust when the customer has a delightful experience. 

Example: Apple’s Apple Care centers are a form of after-sale service. Nordstrom’s unlimited return policy is another type of after-sales service.

Reliability Differentiation:

Some products are known to be more reliable. These products have a smaller chance of malfunctioning or failing and need someone to fix it. A company may also back these products with a lifetime guarantee to emphasize reliability.

Example: Toyotas and Hondas are known for their mechanic reliability.

Looks and Design Differentiation: 

A product’s appearance plays an important role in differentiating the product. Product design can also make it easier for customers to use and benefit from your product. Some customers prefer certain colors. Others choose whichever color and design stand out from the other products. 

Example: Tiffany’s Jewelry has its own iconic “Tiffany blue” box.

What You Should Do Next:

Just like my story about Molly’s Diner, differentiation can help you keep and retain new customers.

Knowing what makes your product different from competitors will help you keep loyal customers. Communicating those differences in your marketing will help you get new customers.

To understand what differences matter the most, talk to your customers and ask them why they choose your product over the competition. Or if you don’t have customers yet, ask potential customers what they like and dislike about competing products. You can then use those differences to improve your product and your messaging.

With enough customers who love your product, you’ll be well on the path to reaching product-market fit.

For more articles like this, click here to check out our articles on positioning.

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