Analyse one reason why product differentiation may be important to a business.

Mark scheme

Marking points from the official mark scheme (May/June 2024). The mark or mark type is shown in brackets.

1. [1] May give a product a USP/distinctive/unique feature
2. [1] May increase customer demand for the product
3. [1] May lead to an increase in market share
4. [1] May strengthen the brand
5. [1] Target niche market
6. [1] Allows premium prices to be set
7. [1] Increases morale/motivation of employees
8. [2] A product is made distinctive so it stands out from competitors' products
9. [2] Assumes a USP in the eyes of consumers
10. [2] Consumers now prefer to buy this product
11. [2] Higher sales and possibly increased share of market
12. [2] Stronger brand image and loyalty
13. [2] A distinctive USP supports premium prices
14. [2] Product success/increased employee motivation
15. [2] Builds brand loyalty due to perceived differentiation from alternative brands – which leads to repeat customers
16. [2] Enables premium price to be charged – which can result in increased profit margins.
17. [2] Increased competitiveness – lead to higher sales and increased market share.
18. [2] Attract investment from shareholders - which increases market value of business.
19. [2] Enables businesses to compete in areas other than price – such as quality or taste which broadens potential areas for success
20. [2] Customers perceive there to be no substitute for the product – enabling business to gain a market advantage via USP