Practise defining and evaluating unique selling points and propositions for IB Business Management SL marketing decisions.
EkoLogiczne Ltd. (EL)
EkoLogiczne Ltd. (EL) is a packaging company owned 60 % by Marek Kowalski and 40 % by his father. EL is a private limited company. Marek founded the company when he realized that the rise in e-commerce would mean the demand for packaging would always increase.
Originally, Marek imagined that EL's unique selling point/proposition (USP) would be to offer recyclable packaging. However, the eco-friendly market was dominated by one large company, Big Boxes (BB), which enjoyed economies of scale. Marek reimagined his USP: EL would have small factories that enabled customized orders to be fulfilled quickly.
Over time, EL opened four factories across Poland and the Czech Republic. Its customers, which included online retailers and small manufacturing companies, placed orders online; if the factory nearest the customer was too busy with other orders, the order would be shifted to another factory. Many customers chose EL rather than BB for this reason. With growth, however, EL began to experience diseconomies of scale and increasingly failed to fulfil orders on time.
Marek is now considering bidding on a large five-year contract for all the packaging solutions for WszystkoMart (WM), a huge traditional retailer trying to expand its e-commerce presence. The contract would require building a huge factory and focusing almost exclusively on keeping costs low. In terms of scale, EL would be almost as big as BB, the large company dominating the eco-friendly packaging market.
To finance the new factory, Marek would either have to sell many shares and reduce his and his father's combined ownership to 40 % or take a 30 -year loan from a bank.
Explain one advantage and one disadvantage for EL of having a unique selling point/ proposition (USP).
Advantages of a unique selling point/proposition include:
- customer loyalty;
- differentiation from competition;
- focused marketing;
- revenue increases;
- it can create barriers to entry to deter potential competitors.
In the case of EL, the advantage that it had because of its USP was that it could differentiate itself from the other packaging companies with its focus on fulfilling quickly customized orders. Also because of its USP, EL attracted additional customers and, presumably, its revenue increased.
Disadvantages of a unique selling point/proposition include:
- it can shape customer expectations, which the company must then meet or disappoint;
- it can become meaningless because of obsolescence of technology;
- it can be too focused, which can result in lost opportunities;
- the messaging about the USP may not be speaking properly to the intended target market.
In the case of EL, a disadvantage of its USP was that the company had effectively shaped customer expectations. However, as the company grew and encountered diseconomies of scale, it began to fail to fulfil orders in a timely fashion. This situation was problematical for EL because its customers chose EL as their supplier precisely because the company's USP was fulfilling orders in a timely fashion.
Accept any other relevant advantage/disadvantage.
Mark as [2] + [2].
Award [1] for one appropriate advantage / disadvantage and [1] for a development with respect to EL. Award a maximum of [2].
[2] cannot be awarded per advantage / disadvantage if the response lacks either explanation and / or application.
For example:
For an identification or a description of an advantage / disadvantage with or without application [1].
For explanation of an advantage/disadvantage with no application [1].
For explanation of an advantage/disadvantage and application [2].