Differentiation is a concept used in business strategy and describes one of the three ways to establish competitive advantage.
Differentiation advantage occurs when a firm delivers greater services for a non-unlimited higher price than its competitors. They are collectively known as positional advantages because they denote the firm's position in its industry as a leader in either superior services or cost. Product differentiation is what allows firms in monopolistic competition (a market structure) to sell their products at different prices, even though they are essentially the same.