What is differentiation strategy?

A differentiation strategy is the choice to compete by being meaningfully different — in features, quality, design, service, or focus — rather than by being cheapest. The difference must be one that a specific set of buyers values enough to pay for.

Differentiation only works relative to what competitors actually offer, which makes it dependent on up-to-date competitive intelligence. If rivals close the gap on your differentiator, the strategy quietly degrades into competitive parity unless you keep moving.