Product differentiation and positioning are important elements in a marketing plan, and most marketing strategies use both techniques. Though the two are different in a few key ways and sit at slightly different positions in the product life cycle, a product's differentiation and positioning are similar in purpose. Both are especially relevant in markets in which a product has several competitors.

Product Differentiation

When it comes to product differentiation, a company must identify the characteristics of its product that make it different from competing products. This is called the value proposition of a product--what makes it unique. Knowing the value proposition of a product, the goal is to highlight those qualities that consumers consider attractive compared to competing brands. As the number of brands proliferates, product differentiation becomes increasingly important.

Common differentiation strategies intend to draw consumers' attention to the value, quality, or uniqueness of the product. For example, a value differentiation strategy based on value could emphasize how the product represents a good deal financially compared to competitors. In industries such as insurance or amongst network providers, the differentiation strategy might be more conceptual than actually in value. For example, Geico is known for its efficiency and approachability for getting an insurance quote with its catchy slogan "15 minutes could save you 15% or more on car insurance." Meanwhile, other insurance companies such as AAA stand behind its high-quality service and heritage in insurance. For network providers ranging from AT&T and Verizon, claims such as "America's largest network" or "America's most reliable network" help to differentiate the various networks. T-Mobile, for example, also provides complimentary international cellphone coverage, which gives it a leg up above other networks.

Product Positioning

After identifying differences, marketing moves on to figuring out ways to situate the product favorably in potential consumers' minds in relation to its competitors. The marketing and promotional plan manipulates symbols, such as in displays and packaging, and communicates tailored messages targeted to people most likely to value what is being marketed.

Product positioning places the differentiated product in the marketplace in ways and places to attract potential customers' attention. This positioning is done to affect consumers' perception of the product. While product differentiation is usually product-specific, product positioning is more about the audience that marketers are trying to target. For example, a brand wanting to market to a younger Millennial or Gen Z audience might position itself alongside popular TikTok stars or celebrities to make the brand trendier. On the flip side, even if a laundry detergent brand is the best on the market, if it's positioned towards younger audiences who don't do their own laundry, the product will flop.

The Bottom Line

Overall, product differentiation can be part of a strategy in positioning a product amongst its competitors: by highlighting its unique qualities. Though product positioning alters customers' perceptions, the marketing message does not always influence people as desired. Marketers might misunderstand their market and the key characteristics important to consumers in that market, meaning marketing success requires both thoughtful product differentiation and positioning.