Product differentiation is the tactic of making your product stand out from the competition by emphasizing unique features or qualities. Imagine you're at a grocery store deciding between two brands of peanut butter. One brand offers a regular peanut butter, while the other brand offers a creamy and crunchy option. The second brand is using product differentiation by providing a variation that sets them apart from the competition. In the world of product management, differentiation is essential to attract customers and create a competitive advantage in the market.