The Effect of Unique Selling Propositions on a Company's Success. The Examples of "Starbucks" and "Amazon"


Term Paper, 2020

18 Pages


Excerpt

Inhalt

1 Introduction
1.1 Methodology

2.1 A deep-dive into the concept of unique selling proposition
2.2 What makes a company ‘successful’?
2.3 Link unique selling point and success – similarities, overlaps and differences
2.4 The coffee leader: Starbucks
2.5 The online-giant ‘Amazon’

3 Conclusion

References

1 Introduction

Let´s assume a person with a lot of money, called Mr. Investor, is going through a list of startups because Mr. Investor wants to invest in one promising start up in order to help the fresh company getting started in the market financially and in turn benefit from the start ups success due to believing in it. While going through the list of startups, Mr. Investor notices that there are 10 startups that want to sell coffee. His first thought is `HMM, yes, I indeed like coffee… But which start up should I choose to invest in? They all promise good and tasty coffee; how can I decide which coffee-start up is the right choice?’ Luckily, as his title as Mr. Investor, he has a broad knowledge in the economic and business sector and remembers the concept and history of the unique selling proposition or unique selling point (USP): It is the result of a marketing problem that comes up when markets are crowded or in other words if many companies offer similar things. So, the main question is ‘Why should a customer by my companies’ product or service rather than my rival’s one?

The concept of the so-called unique selling proposition was invented in the early 1940s by the television advertising pioneer Rosser Reeves. He created successful advertising campaigns and slogans like for example for the M&M’s candies: ‘Melts in your mouth, not in your hand.’ He believed that an advertisement or commercial should show off the value or unique selling proposition of a product and that it has to be honest in order to be sold successful & he was right. But why is it important to have a USP?

Especially due to globalization and digitalization, the number of businesses offering a similar type of product or service has increased tremendously. So, in the first place, a unique selling proposition makes a company stand out from competitors. Also, it allows consumer to see the existent differences between brand offerings in one market and to create a positive attitude towards that unique brand and essentially lead to increased brand-recall. From seller’s point of view, a unique benefit in a product or brand helps sellers to create value for product or brand themselves, in order to be passionate about it and thus confident in it succeeding in the market with it. From this the importance of the USP can be concluded whether talking about the past or nowadays. Mr. Investor is a metaphorical example for the purpose and relevance of this assignment because an actual Investor would go to the same or similar process as the course of this written assignment.

In this assignment, the effect of a unique selling proposition on a company’s success will be discussed and examined. In order to do that, after this introduction into the USP, a closer look will be taken into the concept of USP and some theoretical examples of what a USP could be. Afterwards, the term ‘successful’ will be analyzed in order to firstly understand what factors make a company successful. Then, the worked-out analysis of the unique selling point and a successful company will be applied to two real life examples; One is the non-digital coffee company ‘Starbucks’, followed by the digital online-giant ‘Amazon’ to present the theoretical findings through real-life applications. The aim and intended outcome is to show that a unique selling proposition indeed has a positive relationship with the success of a company. Essentially after reading this assignment the reader will have an understanding of the concept of the USP, it’s importance and how it can lead a company to a promising future.

"Differentiation is one of the most important strategic and tactical activities in which companies must constantly engage."

– Theodore Levitt, professor at Harvard Business School

1.1 Methodology

Information for this assignment was gathered through secondary sources including economic books and scholarly journals where the unique selling proposition is described and discussed. Web sites and articles were used to research attributes of successful companies and about the two case companies Starbucks and Amazon. A YouTube video about the history of amazon was used as supporting material. Pictures and Illustrations are sourced from different online websites as well.

2.1 A deep-dive into the concept of unique selling proposition

Uniqueness is the quality of being particularly remarkable, special or unusual. A unique selling proposition is the uniqueness a company has in their product or service, which will make consumers rather purchase their product or service than their competitors’. In the beginning of the concept’s history, experts believed that in order to create a USP, a product or service had to have at least one explicitly outstanding unique feature, that could be for instance written down in a single paragraph; This changed by the view that what is actually important is the positioning of a product or service on the spectrum of customer needs. A simple example for this is shampoo, where companies offer any type of customized shampoo from dry to colored to vegan types of it. However, to create a continuous stream of uniqueness in a product or service can be indeed a challenge for companies, yet not impossible. It can be achieved in various ways and can also start with features, that might seem simple at first, but are in fact effective and promising:

One way to achieve a unique selling proposition is by offering the highest quality. Rolls Royce uses this approach for example. Another one is to be exclusive. This type of USP becomes increasingly common today in the information age ­– the historical period in which the economy is primarily based upon information technology – and firms offer a unique package of information or knowledge, when purchasing their product or service. Domino’s Pizza is the best-selling brand in the United States due to best customer service; the company promises fast delivery: “Fresh, hot pizza delivered in 30 minutes or less, guaranteed.” ­Others can offer the widest choice. This applies particularly to niche markets like a specialist cheese shop. In industries such as travel trade or catalogue selling an important unique selling point is to give the best guarantee, because customers buy a product and service in advance and then can just hope to receive the promised quality.

Another interesting type of the USP is the ESP: the emotional selling proposition. Sellers use this type of USP, when there is no distinctive functional unique feature, but rather an emotional connection the consumers experience towards the product or service in their minds. An example for this type are the companies Ferrari or Rolex. A company could also create a unique selling point by offering the lowest price. This was the method of the early internet retailing experiments and today’s discounters. However, consumers who base what they buy on the price alone are often disloyal and generally this refers rather to the niche market of discounters and retailers.

The USP is what a business stands for and what it stands out the competition. Some companies attempt wrongly to stand for everything at the same time. Whatever unique feature a company chooses to have it must undertake extensive research of its category as well as of their current and potential consumers. Value for the consumer should be created. If not, there is the risk that the product or service will be seen as commodity or fungible and that would lower the price potential. Therefore, a unique selling proposition is essential in order to have a successful business, that is able to handle competition, whether it refers to current or possible future competitors. When marketing a unique selling point the eagerness to sell the product should be visible, the desirability of the product to the potential customer has to be present as well as the assertion the product is not just special but truly unique.

2.2 What makes a company ‘successful’?

Now there is an understanding that the USP is beneficial if not essential for a company in order to be successful. So, the next question is: When is a company successful ? By answering this question, the USP and the success of a company can be compared and their relationship analyzed afterwards to then finally conclude what affect one has on the other. Of course, the first way to recognize and also measure a firm’s success is through its profit. It is considered as one of the main aspects of a business` success. Start-ups should aim to turn a profit as fast as possible otherwise they are in danger of staying in the market. In order to fulfill that, attention should be paid to maximizing sales and to charge a high enough price to have covered the costs of production and enough of a margin to generate profit. In another way or additionally a company can aim to keep expenses as low as possible. Besides of the profit as a measure of the success of a business, there are several other attributes, that can define what makes a brand successful.

A sign for success in a company is whether it has competitive advantage. It is any characteristic a firm possesses, with which it outperforms its competitors and thus allows it to stay in the market. Michael Porter, a famous economist and Harvard Business School Professor, pioneered the concept of competitive advantage. He broke it down into two forms named differentiation advantage and cost advantage. Differentiation advantage is when a company provides a better and superior product or service to its customers at the same cost as the competition. Cost advantage, on the other hand, refers to a product or service identical to the competition but sold for a lower price. Porter names the two forms as positional advantages because they determine a firm’s position in the industry and the extent to which it is leading in the market. The following are the main factors that can help a company to have a competitive advantage in the market and hence lead to success:

One important factor is the focus on customers and their needs. Referring back to the in the beginning mentioned shampoo example, successful firms always listen to what their buyers want including multiple features from flavors and fragrances to size and services. The best way to know what your customers want is to ask them. This can be done through marketing research surveys by phone, the internet or in person in order to get a feedback. By doing that continuously, the customer needs can be essentially fulfilled more accurate and thus the customer built the next features of success in a company: Customer loyalty and brand awareness. People will return or stick to your brand because of great customer service even if the price is not the lowest in the market. Brand awareness is the percentage of people, who know your brand, product or service. It takes a long time to build it, but it comes with great market leadership once it is achieved. Companies can create brand awareness themselves by promoting your product or service via sales promotion, trade shows, articles, speeches or special events for example.

Other features when looking at what makes a successful company speaking more general always include a vision in the form of pursuing a long-term goal as well as a great management team or in other words above-average management. It is like the basis of a successful business referring to them as tools, which give you a better outcome the better and stronger they are. Retaining talent employee means also always looking for new talented fishes in the sea of potential employees. New and fresh minds can essentially offer innovations and new ideas or perspectives, which can drive a company forward in various ways. This point connects to the last features of successful firms that will be discussed: Innovation, trends and the adaption to new trends.

Expressed bluntly, when you create a qualitative product or service, which is also a feature of success, you can prepare for it to be copied. Therefore, successful companies are constantly innovating whether it is improving an existent product or service or inventing something new. Innovation starts with improving the product or service as well as looking for beneficial price changes or discovering new ways to communicate with your customers. A company should always keep innovating. Not only due to imitators, innovation is important but also because of trends and changes in the world. In fact, these are one of the most important factors of successful brands; the adaption to trends and changes.

A trend is a general development or change in a situation or in the way that people are behaving (TREND | meaning in the Cambridge English Dictionary, 2020). One of the biggest trend in this century is obviously technology. Starting with the first computer, followed by the internet until todays huge progress and even development of robotics, digitalization not only has changed the individuals’ lifestyle but it also affected businesses and how they proceed and in fact helps businesses. So, in order for a company to be successful, it should adapt and optimally adapt quickly to new technologies that will help to run the business or in other words constant flexibility towards changes should be present. The most successful companies adapt to trends and technologies and even if a business can’t afford the most fancy and big technologies, a look into new soft wares or office equipment still makes the work a lot easier.

Also, adding new technology can improve a company’s infrastructure so that it grows and advances. It gives the business the chance to essentially lower their costs or to improve customer experience. It is really hard nowadays for a company to survive if dispense with technology. Other very big trends today are for example the consideration of climate change and animals. Those factors became important for consumers in the past years due to heavy abuse of nature and animals, so more and more people in fact pay attention to whether brands consider these factors when producing and selling their product or service. This refers back to the first point, which was the focus on consumers and consumer needs and in turn closes the cycle of important features to run a company successfully.

2.3 Link unique selling point and success – similarities, overlaps and differences

The research question of this assignment considers the effect of the unique selling proposition on the success of a company. After analyzing the concept and the term separately, in this section the two will be compared, existing overlaps highlighted and differences stated. Later on, after two real life examples, all findings will be summarized and the final conclusion will be drawn to fully answer to the research question. Section 2.3 is especially important in order to see the relationship of the USP and ‘success’. From the earlier sections, immediately a couple of similar terms become noticeable.

Both analysis showed that in order to have a good base and a promising start into the business extensive research and knowledge in the market and of the consumer is important. A good analysis of consumer needs is major to create a fitting USP and as well to win customer loyalty and brand awareness. Brand awareness is best achieved by promotion and the successful company will highlight the USP in their marketing. In some cases, it makes sense to base the choice of USP on the niche market or on the industry a brand is in remembering the good guarantee as perfect USP for the market where customers pay before knowing how good the product or service is. In other situations, the unique selling point is beneficial to adapt to current trends and changes in the world. Taking the earlier example of today’s information age, where it becomes increasingly popular to have exclusive information or knowledge in an extra package as a unique selling point. A good unique selling proposition is good for the first, but what is more important is that it fits the demand of current trends and behaviors.

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Details

Title
The Effect of Unique Selling Propositions on a Company's Success. The Examples of "Starbucks" and "Amazon"
Author
Year
2020
Pages
18
Catalog Number
V1137312
ISBN (eBook)
9783346518101
ISBN (Book)
9783346518118
Language
English
Tags
effect, unique, selling, propositions, company, success, the examples, starbucks, amazon
Quote paper
Elisabeth Schulz (Author), 2020, The Effect of Unique Selling Propositions on a Company's Success. The Examples of "Starbucks" and "Amazon", Munich, GRIN Verlag, https://www.grin.com/document/1137312

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