Differentiation occurs when a company, product or service stands out from the competition by meeting a unique customer need, incorporating special features not generally available, or by serving a specific target market better than anyone else.
Successful differentiation creates a competitive advantage for a company. This leads to increased brand loyalty, which means more sales and allows the company to sell its products at a higher price, if it chooses to do so.
A true differentiator is easily perceived by customers.
More about differentiation
The following gives an example of how a company—in this case, a sandwich shop—might differentiate itself.
If the company makes sandwiches with a unique kind of bread based on its own recipe, this differentiator provides an offer advantage because nobody else in its neighbourhood is using that kind of bread.
If the company makes sandwiches exclusively for vegetarians, this differentiator provides a niche advantage because its competitors are unlikely to cater to that particular market to such a high level.