Business Studies Multiple Choice Question – 16 April 2022

Shampoos are often differentiated by features such as ‘with avocado oil’ or ‘with wild herbs and flowers’.

The MOST LIKELY reason for shampoo manufacturers to use product differentiation is to?

Select ONE answer:

1. reduce production costs
2. appeal to the mass market
3. give a competitive advantage
4. predict demand for a new product

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct – adding extra ingredients to differentiate the shampoos will add to production costs rather than reduce them.
2. Not correct – adding these ingredients the shampoo manufacturers are segmenting the market therefore not appealing to the mass market.
3. Correct – Product differentiation is the process of distinguishing a product or service from others in order to make it more attractive than its competitors. Manufacturers can highlight the use of specialised ingredients such as ‘wild flowers’ to differentiate from ordinary shampoos. Some customers who like exotic products or want certain treatments for their hair will buy the products that offer these perceived benefits, generating customer loyalty and potential higher sales revenue.
4. Not correct – shampoo manufacturers are already selling their products not trialing new products to predict potential demand.

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