Differentiation occurs when a business or company stands out from the competition by offering products or services that are unique and different from what is offered by any other business in the same market. Differentiation gives a business a competitive advantage especially in a saturated market.
The differentiator which could be a special feature, or different price tag can act as a leverage to drive sales and increase brand awareness.
Common differentiation strategies are;
Price differentiation - no two customers are the same and nobody knows this more than major companies like Apple. In price differentiation, a company stands out from its competition by offering its products are a different price point.
Some companies may focus on pricing their products higher, implying that it is a luxury good and of good quality. Example is Apple company. On the other hand, some companies might take the part of the underdog and offer their products at a lower price tag.
Another way to differentiate by price is by offering products at two different price points. Example again is Apple which offers iPhone worth more than $1000 and another category priced within the reach of the average consumer.
Product differentiation - here companies try to stand out from the crowd by designing their products in a way that it is perceived as unique in a given niche market. The mobile phone industry is a good example once again.
Samsung and Apple are phone producers that have distinguished themselves in this manner. Each year these tech giants try to outdo each other both in design as well as tech features incorporated into their mobile phones.
Image differentiation - some companies distinguish themselves by creating a specific image in a niche market. For instance, Apple is known for its high price tags which portrays the image of luxury and quality. So while other companies offered low prices, Apple stuck to its usual steep price tag, eventually, the company became a symbol of luxury.
Differentiation by distribution - with the growth of online shopping, distribution became very important to both companies and their customers. The faster you could deliver a product, the more customers preferred shopping with your company.
Amazon differentiated itself from most other online shopping companies by launching same-day delivery as early as 2013. Today, many companies have jumped on the train, speeding up the time interval between purchase and delivery.
Although these are common ways in which companies differentiate themselves, it is not to say that these are the only ways of doing so. Example by providing unrivaled customer services, handling returns and exchanges differently, using innovatoive payment solutions, by providing easy repairs and services for your customers etc.