Two and a half kinds of differentiation

There are two and a half ways to approach a product which you want people to buy:

1) Be differentiated
Create a product that meets some need in a way that no one else does. You have to be:

• Smart
• Lucky
• Persistent
• Some combination of all of the above 

oh... and the bar keeps moving because once you find that need, more people will follow...

2) Be cheap
Be the least expensive option on the market.
This is a kind of differentiation but one that is difficult to maintain because:

• Lots of people know how to do it
• It saps the resources you need to run your business

Do it to the logical extreme and eventually you are nothing but "cheap" (which is not always good enough to buy).

2.5) Create differentiation where it doesn't really exist
Be loud!
This includes things like:

• Fancy packages
• Clever names
• Massive ad campaigns (ala Cola Wars).
• Rent seeking behaviors

This seems to be a popular option but, when exposed for what it is, I think most people think it smells funny.

Each has it's place and clearly can be successful. I prefer seeking to be differentiated.
Understanding what people really need by looking for the patterns underneath what they say they want is quite interesting sometimes.