Product Differentiation: Companies That Benefit From Building Product Variants | by Tremis Skeete | Feb, 2023

Learn about how consumer companies compete for control of portions of markets by launching variants that customers love.

Ever wondered about what industries or fields is product differentiation applicable? Perhaps the key benefit of a well planned differentiation campaign is a well orchestrated set of development, pricing, and marketing strategies designed to maximise visibility of products that are arguably similar to others.

Examples that benefit from product differentiation strategies can be found in companies that manufacture products such as, but are not limited to:

• Cereal
• Coffee
• Automobiles
• Clothing
• Footwear
• Hotels
• Travel Booking
• Music Streaming
• Computers
• Soft Drinks
• Software
• Smartphones, etc.

Companies that engage in releasing variants of products like these also contribute to the popularity of their brands in respective markets.

This makes differentiation planning an even more critical skill for product managers to develop, because their respective brands are vying to control the greatest portion of their market by launching product variants that customers love.

For every product variant that’s created, each share a distinct brand and many of the resources behind it. For example — under the ‘Coke’ brand, you have Coke, Diet-Coke, Cherry Coke, Coke Zero, and the list goes on.

For the Apple iPhone, you have iPhone 13, iPhone 13 mini, iPhone 13 Pro, iPhone Pro Max, iPhone SE, and it goes on.

That’s why as product managers, when we proceed with a strategy for a new product variant, we must consider that we are also creating a variant of the brand itself; and for every brand variant that’s created, there are implications to consider, especially matters regarding access to source materials, experts, sales and distribution channels, funding, and most importantly — the impact on the overall brand.

Let’s take a look at two brands that have historically competed for the hearts and minds of soft drink lovers everywhere-Coke and Pepsi. Coke, according to beveragedaily.com, is still the most consumed soft drink in the world. Pepsi comes in second place.

Branding, Marketing, Advertising, Packaging

Thanks to the strong campaigns in marketing, advertising, packaging, the unmistakable Coke logo and branding, and the high sugar and higher caffeine content-Coke remains superior.

Even after the famous Pepsi Challenge, when according to Greenbook.org, it was revealed that Pepsi contained more sugar than Coke, and more challenge takers admitted that Pepsi tasted ‘sweeter’ than Coke-it did not remove Coke from its number one spot.

Why is that? What really makes Coke that different from Pepsi? It apparently comes down to messaging and storytelling.

Messaging and Storytelling

Coke does a better job at positioning their brand and winning over the attention of more paying consumers. Coke’s product messaging is all about building relationships and drinking ‘happiness’ which appeals to families and more mature consumers, while Pepsi tends to focus on highlighting entertainment and sports in their advertising, which seems to appeal to a younger consumer base.

Both strategies are profitable in their own right, and by Coke being an older thus more established brand, perhaps that also gives them an edge in the market over Pepsi. Nevertheless, according to sources, Coke still wins.

Let’s examine the world of software, particularly how Microsoft and Google approach differentiation regarding their productivity platforms, Microsoft 365 and Google Workspace.

Both services are successful, and if you dive deeper into how they’ve established innovative offerings and adoption with their respective customers–certain common traits emerge:

Both Microsoft and Google understand their own service capabilities

In their own ways, Microsoft and Google focus on what they do best. Microsoft is dominant in the world of operating systems with Windows and desktop publishing applications with Microsoft Office.

With the established success in these areas, they used that success to their advantage designing Microsoft 365 to integrate seamlessly with the Windows desktop environment.

This means that users can still work on their Office documents comfortably on the desktop/laptop devices, and have the option to upload and sync to the Microsoft 365 cloud environment. It’s a great example of taking something customers are familiar with, and extending that capability to online services.

Google is a big player in the world of search technology and data management. Google has also proven to have a robust web browser, Google Chrome, while Microsoft managed to hold on in the browser market with Microsoft Edge, largely because Edge is included with Windows.

Both understand their market advantages and disadvantages

While Google does not have a desktop operating system of its own, they leveraged the power of the internet in 2006, according to Engadget, to develop a document publishing environment that can run online.

Not only did creating documents online become a reality–they also made it possible for users to collaborate online on the same documents. Microsoft did not respond to this innovation until four years later with Office 2010, Engadget reported.

The distinct advantage of Microsoft 365 over Google Workspace is that Microsoft Office applications can still be used without internet access, which makes it a reliable option for larger companies that most likely still use many of Microsoft’s products.

However, Google Workspace is the more economical option. The subscription rates are cheaper, and it’s faster to set up for use, which makes it a better option for small businesses and startups.

Both have demonstrated via storytelling how to use what they are known for to get consumer attention

Microsoft markets Microsoft 365 as a productivity service which includes “More than just apps like Word, Excel, PowerPoint,” according to the Microsoft web site. It’s a clever approach because they use the products we are familiar with to attract consumers.

Google does something similar, except they mention communication apps such as Gmail and Google Meet to attract consumers. Both companies use the products they are widely known for to connect with consumers and sell comparable services.

If there’s a differentiated service that makes it circumstantial in choosing the right one for you–it’s music streaming. There are a few things users consider when they choose a streaming service, such as the price, the app user interfaces (UI) the user experience (UX), whether it’s compatible with their devices, and whether they offer free access.

But as streaming continues to grab the attention of more users, they are now influenced by not just which service they prefer–but also which ones their friends, family, and their social circles at large prefer.

Yes, it’s true all the services offer free access in their own ways, but if customers and their chosen communities want full access to any streaming service, there are other differentiators companies use to attract customers, such as:

• Enhanced audio quality
• Volume of the music library
• Types of music collections that are available
• Number of artists that are featured
• Playlist sharing with other users
• Types of other audio content and features included
• Free and premium subscriptions
• Temporary subscription discounts
• Access to content with internet access (i.e. offline)
• Include streaming subscriptions with other third-party online services
• Access to lyrics and transcripts
• Access to select collections based on subscription level, etc.

With these differentiation techniques, streaming services will continue to work to discover the kinds of streaming experiences that are valuable for customers, especially in terms of what customers feel is convenient for their lifestyle, and what makes it possible for them to connect with like-minded people, family and friends.

If you really want your product to stand out among the competition and turn your new customers into loyal customers — build a welcoming and seamless onboarding experience that helps users learn quickly about what makes the service perfect for them.

Consider this — if you have an online banking product and you’re trying to win in the market, then you are up against a lot of competitors.

So if you’re trying to attract customers, then which product do you think will win when it comes to getting customers to subscribe? The product with the easiest and most helpful onboarding. It won’t matter how innovative your banking services are, if the onboarding is too tedious to go through.

If there are moments where the onboarding does not feel like it’s quick enough, then ensure you provide useful information or features that the customer finds valuable. To accomplish this part — it requires that you learn what your customers feel makes for a great customer experience.

In other words — find out what they want, and what they don’t want. Find out what they don’t like about your competitors. Find out why they stopped using a particular product and chose a competitor instead. Find out from former customers why they stopped using your product and chose something else.

Also, during an onboarding process, if you need to collect important data from the customer, do it in a way that makes it easy for the customer to provide it. Don’t design the process in a way that makes it easy for your business to get the data (i.e. no long web forms please).

If it means that you (the business) must ask for bits of information, one step at a time — then so be it. It’s the difference between making customers feel comfortable, and overwhelming the customers.

Innovations in developing better differentiation techniques have revealed that businesses can discover ingenious ideas for attracting customers by leveraging the power of their brand (BX) and customer experiences (CX).

Brand experience (BX) is all about the impressions, perceptions, thoughts, feelings, and responses you have when you interact or connect with a brand. Think of the BX as the moment where the selling experience begins (i.e. where the business begins selling to customers).

Customer experience (CX) is all about how a person thinks, feels, understands and responds as they interact with a brand’s products, people and other services.

The CX is where the customer shopping experience begins (i.e. where the customer notices the brand and wants to know more), and it ideally transforms into the customer buying experience in light of their purchase and satisfaction (customer is sold, then buys and uses the product).

The Brand Experience (BX)

To also distinguish between BX and CX, imagine the difference between how you feel about how a hotel looks when you hear its name, see its logo, pictures of the rooms, visit the website, read the reviews — that’s the BX.

The Customer Experience (CX)

Now imagine how you feel about the hotel when you reserved the room online, when you arrived at the hotel and the concierge greeted you, when they checked you in, helped you with your bags to your room, provided towels, room service, wished you safe travels when you checked out, and sent you a ‘thank you for your stay’ email message with the option to share feedback — that’s the CX.

According to a Harvard Business Review (“HBR”) report, businesses today have the opportunity to differentiate services from the moments when customers come in contact with their brand and explore — to the moment when customers believe they no longer want or need the services.

Understanding the experience at any step in the customer journey presents companies the opportunity to explore ideas to design services and features that stand out.

The next steps logically would be for product management to bring together the talents of other business areas to brainstorm, design, test, refine and build upon the right ideas for product variants.

“The task then becomes selecting from among this wealth of possibilities; considering how each idea meshes with a company’s particular skills, assets, and systems; and focusing only on those that can generate a competitive [market] advantage,” wrote Harvard Business Review (“HBR”).

Differentiating products and services can also contribute to an equilibrium between the business itself and its public relations activities — and the specific customer support provided regarding the products they sell. In other words — businesses can better balance management of the customer and public perception of the business itself — with the customer perception of the products and services as they see fit.

Amazon.com for example, offers to partner sellers a “Seller Fulfilled Prime” program which is designed to help them differentiate themselves from other partner sellers who don’t sell products that are “Prime-Eligible”. When a partner seller is Prime-Eligible, Amazon offers a differentiated brand by allowing them to display the “Prime” badge on their products.

Amazon customers are more inclined to buy Prime products, because the products are guaranteed faster delivery according to Amazon policies.

To ensure a consistent experience for buyers, Prime-Eligible sellers must, “agree to all shipping, returns, and customer service requirements applicable to Prime products,” according to the Amazon Seller Central website.

Not only does the policy serve as a incentive for sellers to make more money by being Prime-Eligible, it also ensures the Amazon brand is protected from liability in the event that a Prime-Eligible seller fails to maintain their part of the agreement.

If a seller doesn’t live up to the Amazon Prime guarantee, it won’t be Amazon’s fault, but the fault of the partner seller. Amazon will then connect with the customer to ensure their issue is resolved, and the customer will view Amazon as the business that places a premium on quality customer service.

Product managers need to work closely with brand management and marketing teams to ensure the brand positioning remains strong during the implementation of new differentiation initiatives. It’s because ideally, the business would like to ensure that variants are not competing against each other to the point where it negatively impacts sales objectives.

As a product manager, find out from your sales and marketing counterparts what they understand about customers in regard to the different variants. Find out what makes each variant stand out. Find out which are at risk of underperforming.

Find out which variants if any have failed in the past, and the reasons why. Read the customer logs and interview transcripts they can provide so that you can extrapolate feedback patterns in the data.

The answers and insights can help you to navigate pathways to success with differentiation strategies for existing and future variants.