The answers for AQA Business Studies for AS page 253 B1 Data Response. These answers involve unique selling points, innovation and marketing.
1. a) The definition of a unique selling point is of one feature that makes a product different from all its rivals.
1. b) San Paulo’s unique selling point is the traditional Italian styles in coffee bars.
2. Product differentiation is a way of a business making their product different from the market, making it stand out. From San Paulo, its clear that their innovation from creating a unique selling point of a traditional Italian style coffee bar has been copied by other competitors. Therefore, it is clear San Paulo needs to innovate again to make them stand out in the market, even if customers see San Paulo as being the original coffee bar of its type. They have done this through reducing the price premium, which is a bold move potentially moving San Paulo into mass marketing and into price penetration. However, there is a possibility that competitors will once again copy San Paulo, therefore it is crucial for them to keep innovating. However, product differentiation may cost San Paulo. From reducing the price premium may result in a decrease in profit, as more needs to be sold to make same profit. As well as that, the customers know that San Paulo were the original Italian coffee bar so there may not be a need to product differentiate if the customers know that San Paulo created this niche market.
Ultimately, I think San Paulo should keep constantly differentiating their product. The market relies on USP heavily, therefore that should motivate San Paulo to keep producing new USP other competitors haven’t got. And once they have differentiated their product, I feel they should patent the idea to stop competitors copying it which is highly likely.
3. From charging higher prices will cause the English San Paulo to step into price skimming. The higher prices will make the coffee bar look a more premium coffee bar, giving a sense of quality due to the high price resulting in high product differentiation. One way to create high product differentiation is through making a well-recognised brand. This will increase the repetitive sales as well as making the coffee bar look more desirable. The best ways to promote San Paulo’s brand is through public relations, as I don’t think many people would go to a coffee bar just because they heard an advert on it. Good reviews will help attract customers and help increase brand loyalty. Another way to create high differentiation is through a distinctive design, be it already in the coffee bar (Italian style), but the drinks they offer could be styled different. Another way is through performance, or in this case, quality and taste of the drinks. If the drinks appeal more to customers than the other competitors such as Costa, Caffe Nero and Starbucks, more customers will go to San Paulo.
Ultimately, I think they should not use any product differentiation. They have their unique selling point, which none of the English market have. The other product differentiations I mentioned above will only have minor effects to the business’ profits, they have already created a high differentiated product.