Walk down any supermarket aisle: dozens of breakfast cereals, each a little different. Open a streaming platform: thousands of songs and shows, none exactly alike. Most real markets are not about identical products. Firms deliberately make their goods distinct—by design, location, quality, or brand—to soften price competition and build a loyal customer base. This chapter explains the economics behind that choice. We’ll look at why firms differentiate, how much differentiation we should expect, and how economists model the demand for products that are close but not perfect substitutes.