What is product differentiation? How does it relate to market segmentation? How does it potentially improve a firm's revenues?

Product differentiation involves a firm using different marketing mix actions, such as product features and advertising, to help consumers perceive the product as being different and better than competing products. The perceived differences may involve physical features, such as size or color, or nonphysical ones, such as image or price. Thus, product differentiation relates to market segmentation, where perhaps the same or similar target markets are more likely to buy the product differentiated as having greater reliability or lower price.