What does the term differentiation refer to in a business context?

Differentiation in a business context refers to the strategy of making a product or service unique and distinct from those offered by competitors. This allows a business to create a competitive edge, attracting customers who are seeking specific features, benefits, or a brand identity that resonates with them. By standing out, a company can justify higher prices, cultivate brand loyalty, and build a customer base that values what makes the product or service special.

Successful differentiation can be achieved through various means, such as innovative features, superior quality, exceptional customer service, or branding and marketing strategies that emphasize unique aspects. This approach not only helps in retaining customers but also in reaching new markets that may not be satisfied with average or undistinguished offerings.