What is meant by product differentiation?

Product differentiation refers to the strategy employed by businesses to distinguish their goods or services from those of their competitors. This differentiation can take various forms, such as variations in quality, features, design, branding, or customer service. By creating products with slight differences, companies can appeal to specific consumer preferences and needs, positioning themselves in a competitive market.

This strategy is particularly important in markets where many similar products exist. By offering unique attributes or enhancements, a company can attract a loyal customer base and reduce direct competition on price alone. It also allows consumers to make choices based on factors beyond just price, which can lead to increased satisfaction and brand loyalty.