Unique Selling Points & Differentiation (DP IB Business Management)

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Flashcards

The Importance of Having a Unique Selling Point (USP)

  • A unique selling point (USP) is a distinguishing factor or characteristic of a product, service or brand that sets it apart from its competitors

  • The USP helps a business to differentiate itself and give customers a reason to choose one product or service over others because it offers something distinct and valuable

  • There are a range of reasons why businesses develop a USP which can include

    • Developing a brand identity

    • Achieving a competitive advantage over rivals

    • Effective communication with customers

    • The attraction and retention of customers

    • Achieving power over pricing

    • Encouraging innovation and adaption

Diagram: reasons for developing a USP

Developing a USP helps businesses to attract and retain customers, gain competitive advantage, generate pricing power, and build brand identity
The development of a USP can contribute to business success for many reasons
  1. Competitive advantage: A strong USP gives a business a competitive edge by creating a barrier to entry for other businesses in the market

    • If a business can offer something that is difficult to imitate, it becomes more difficult for competitors to gain customers

  2. Brand identity: A unique selling point helps to shape the perception of the business in the minds of consumers

    • It becomes an essential part of the brand's story and message, which allows customers to associate specific qualities or benefits with the brand

  3. Communication: A well-defined USP provides a clear message that highlights the unique benefits and advantages offered by the product/service, making it more compelling and memorable

    • E.g. Emirates' USP is a high-quality service and luxurious amenities supported by extensive marketing efforts such as sponsorship deals with sports teams and events

  4. Retention and attraction of customers: A unique selling point can help attract new customers by appealing to their needs and desires, making customers more likely to choose and remain loyal to the brand

  5. Pricing power: A strong USP can often justify the firms decision to charge higher prices for products/services, as customers are willing to pay more

    • This pricing power can improve a business's profitability and financial performance

    • E.g. Volvo has a reputation for safety, reliability and comfort, which means that customers are willing to pay premium prices for its vehicles

  6. Innovation and adaptation: Developing and maintaining a unique selling point encourages businesses to continuously improve their products, explore new ideas and adapt to changing customer needs and preferences

    • E.g. Apple customers expect to be able to upgrade their technology devices frequently and value the ability to buy complementary goods, which add value

Examiner Tip

You should consider the value of a businesses USP to its success. Those which are difficult or expensive for competitors to replicate or which are protected in law (such as patents or copyrights) are the most valuable and are likely to lead to long-term competitive advantage. 

Business & Product Differentiation

  • Product differentiation is an attempt by a business to distinguish its products from those of competitors

    • This involves creating functions or features of the product (or firm) which help it to stand out from its competitors

    • Strong product differentiation helps the firm to develop its competitive advantage

    • The development of product differentiation often helps a firm to create a unique selling point for its product which can be used in marketing

    • Product differentiation may be tangible (clearly visible) or it may be intangible (a perception) that is created about the product in the consumer's mind

  • Common methods used by businesses to differentiate products include

Diagram: methods of differentiation

Business can differentiate their products in many different ways 
Business can differentiate their products in many different ways 
  •  Successful business or product differentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices

Differentiation Methods

Method

Explanation

Example

Marketing and branding

  • Building brand identification through distinct advertising or promotional activities helps a business to differentiate itself from competitors

  • Compare the Market created a memorable brand identity around a meerkat, playing on the words 'market' and meerkat

Packaging

  • Well-designed and attractive packaging that appeals to the target market can provide shelf appeal and encourage customers to select one product over another

  • Apple products are well known for their superior packaging, which creates an exciting opening experience for the customer

Functions and features

  • Adding unique features gains attention and increases demand from customers who may provide the business with favourable reviews 

  • Samsung's Galaxy Watch 5 has robust health tracking tools built into it, along with an amazing screen

Customisation

  • Allowing customers to design or customise their products allows the firm to charge a higher price

  • MoonPig.com's celebration cards can be completely customised

Customer service

  • Businesses that ensure they have a good reputation for customer service are likely to retain customers

  • In 2014, Hyundai in Singapore introduced a three year warranty on all new cars when the industry standard was one year

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