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In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as from a firm's other products.
The two main attributes that allow consumers to differentiate among products are price and quality. Finding the correct balance between these two attributes usually leads to a successful product. If a company is able to produce the same quality product as its direct competition but sell it for less, this provides a price value to the consumer.
In marketing, the unique selling proposition (USP), also called the unique selling point or the unique value proposition (UVP) in the business model canvas, is the marketing strategy of informing customers about how one's own brand or product is superior to its competitors (in addition to its other values).
Customers are looking for answers that may improve or replace products or services. Customers will never buy a product or service if they don't feel like they are receiving the best possible deal. Therefore, the value proposition is important to businesses and their success. [12] The value proposition serves to differentiate the brand from ...
Differentiation drives profitability when the added price of the product outweighs the added expense to acquire the product or service but is ineffective when its uniqueness is easily replicated by its competitors. [6] Successful brand management also results in perceived uniqueness even when the physical product is the same as competitors.
Apart from the concern over cost and time, another disadvantage would be differentiation hinders market entry. It is because successful differentiation would attract competitors to replicate, and once competitors implement price differentiation strategy, customers are likely to leave for a better offer in terms of the price.