CHAPTER 5: Differentiation Advantage

Differentiation is a strategy whereby companies attempt to gain competitive advantage by offering value that is not available in other products or services. This value may come in the form of different product features, product quality or reliability, convenience, or brand image. Differentiation is always a matter of customer perception. The actual products of two different companies may be similar in terms of technical features, but if one product is perceived as being different in a way that is valued by customers, then product differentiation exists. When the perceived value of the product increases in the mind of the customer, it also increases the customer’s willingness to pay a higher price.