Final answer:
Product differentiation is the process whereby a company makes its product stand out from competitors through unique features, quality, advertising, and other attributes that influence consumer perception and preference.
Step-by-step explanation:
When a company uses the marketing mix to attract customers to their products' real or perceived differences, they are engaging in product differentiation. This is a strategy where firms make their products appear unique and different from those of competitors. Differentiation can be achieved through various dimensions, such as the physical aspects of the product, location from which it is sold, intangible aspects like guarantees or reputation for high quality, as well as shaping customer perceptions through advertising.
For example, even if two brands of ketchup or mayonnaise taste quite similar, advertising can lead consumers to develop a strong preference for one over another based on their established habits or the brand's reputation. Thus, product differentiation is essential in making a product stand out in a competitive market.