Product Differentiation - Meaning & Definition

Published by MBA Skool Team, Last Updated: November 07, 2014

What is Product Differentiation?

Product differentiation is a marketing strategy where a product is differentiated either by availability or by altering few features or by communicating the existing differences more effectively to customers.


It is done to make the product stand apart from other similar products in the market and be more appealing to the target customers. By differentiating a product the risk of substitution decreases. The competition is not just based on price of similar products but on characteristics the differentiated product offers.


Types of product differentiation strategy:


Vertical Product Differentiation:

Products are different in a way that one product is superior to other and if offered at same price customers will choose one product over the other.

Example: i5 processor and i7 processor, pharmaceutical branded drugs and generic drugs etc.


Horizontal Product Differentiation:

Products are different in some attributes but similar in quality and are offered at similar pricing in a way that some consumers may choose one product and some might choose another based on their personal preferences.

Example: Coke and Pepsi, Same product in different colors etc.


This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

Browse the definition and meaning of more similar terms. The Management Dictionary covers over 2000 business concepts from 5 categories.

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