Final answer:
A firm can differentiate its products from competitors by focusing on physical attributes, location, intangible aspects, and consumer perceptions.
Step-by-step explanation:
Product differentiation is a marketing strategy that businesses use to distinguish their products from those of competitors. Firms can differentiate their products through physical aspects, location, intangible aspects, and the perception of the product. These intangible aspects may include guarantees of satisfaction, reputations for high quality, added services like free delivery, or financial incentives such as loans for product purchases. Furthermore, many of these preferences are cultivated in the minds of consumers through advertising, which can significantly shape these intangible preferences and lead to strong brand loyalty, even when there is little to no discernible difference when the products are compared side by side.
Differentiated products are those that stand out in the market due to any combination of mentioned factors. Through differentiation, a company seeks to attract and retain customers by appealing to their unique preferences and values, especially in saturated markets where many products offer similar features or benefits.