Product Differentiation for The Specialty Store

The specialty store often faces stiff competition from the “big box stores” that usually sell products at a cheaper price. If your retail store is selling the same thing as a big store, how can you make your product stand out? How can you make customers want to purchase from you rather than the competition? You can accomplish this partly through product differentiation. Specialty stores offer much more than just products.

Types of Differentiation

Product differentiation is achieved in a number of ways. It is not always about the product itself – after all, Bo Bunny scrapbooking paper is the same whether you buy it from Hobby Lobby or a locally owned scrapbook supply store. You can differentiate your product from that of other stores through:

  • Pricing
  • Service
  • Customer loyalty programs
  • Styling
  • Quality

The products themselves can be presented to differentiate between features or function. This type of differentiation includes:

  • Vertical
  • Horizontal
  • Mixed
  • Circular


Pricing is, for some shoppers, the bottom line. This takes them to the big retailers who can buy in bulk and sell cheaper. But, pricing is not always dependent on volume. There are other articles on this site that give pointers volatile pricing.


Big chain stores are seldom capable of providing the expert service available at specialty stores. Most owners of specialty stores have a special interest in the products they carry, whether it is clothing, jewelry, hardware, or sewing. This unique area of expertise should be monetized by the owner. You can provide individualized service and expert advice in ways that part-time employees at a chain store cannot approach.

Customer Loyalty Programs

Other articles on this site have talked about customer loyalty programs. You can keep your customers simply by implementing a rewards program. This differentiates your product from similar products offered by big, impersonal chain stores.


The specialty store has more flexibility in displays than bulk sellers. You can differentiate your product from that of your competition through the style of your store and the ways in which you display your product. A small clothing retail store can display name-brand designers with accessories made by local artisans. A specialty whole foods store can offer cooking classes for loyal customers.


The small specialty retailer usually offers at least a few products or services that cannot be found anywhere else. In some cases, your products may be custom-made. Stress the quality of service and products to your customers, so that they will remember why they like to shop with you.

Vertical Differentiation

Vertical differentiation is the act of categorizing products from “good” to “best.” To do this, you choose one element of the product and rank all of the products with that element accordingly. If you choose several elements, you might create a scorecard that ranks overall value to the customer. With several features in consideration, there may be trade-offs. You can then style your displays and advertising touting various features of the products.

Horizontal Differentiation

With horizontal differentiation, you are classifying items by genre, such as shapes, flavor, color, or era. A specialty store, for example, may offer Mid-Century Modern furnishings and accessories for homeowners. This means the shopper will find a clock, end -tables, a coffee percolator, and wall art that all fit the mid-century design. The only thing these items have in common is the era, but it is exactly what the customer is looking for.

Mixed Differentiation

Mixed differentiation is a combination of the other two. An example of this is the automobile market. There are cars available for a wide range of incomes, in an almost endless selection of colors and options. The differentiation may even be in the employees you have and their interaction with customers. Some employees are able to get customers to verbalize their tastes.

Circular Differentiation

With circular differentiation, the store owner will present his products based on one or more characteristics as listed in a bulls-eye target. The bulls-eye is the basic purpose of the product. This will include any make, model, quality, and price, as long as it does what the product is supposed to do.

The next circle of the bulls-eye is the generic product. This is the basic function that makes the item work. For an electric iron, it would be the ability to heat enough to iron clothes.

Next is the expected product. When people buy a vacuum cleaner, they expect it to look and function a certain way.

The augmented product is the degree of “fanciness.” Does the washing machine have a “silent spin cycle?” Hopefully, specialty stores can own the market in this area.

Potential product is the possibility of modifications the product may go through in the future. For example, from incandescent lights, we went to fluorescent lights, and then to LEDs. A person who had the foresight to predict the popularity of LEDs could corner the market.