Unique Selling Points & Differentiation (HL IB Business Management)

• 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 Showing the Reasons for Developing USP's

The development of a USP can contribute to business success for many reasons

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

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

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
    

Customer attraction and retention

• 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

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

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

• 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
  • Marketing and branding activities
  • Eye-catching packaging
  • Attractive functions and features
  • Product customisation
  • Excellent customer service
     

Diagram with five Methods of Differentiation

Business often use a range of methods to differentiate their products and brand

 

•  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
   

Methods used by Businesses to Differentiate Themselves & Their Products

Method	Explanation	Example
Marketing and branding	Building brand identification through distinct advertising or promotional activities helps a business to differentiate itself from competitors	A market comparison website in the UK has created a very 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 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 birthday 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 Cars in Singapore introduced a three year warranty on all new cars when the industry standard was one year