Quick questions on Branding and product differentiation explained: H2 Management of Business

Brand equity is the added value a brand gives a product beyond its functional attributes - the commercial value from customers' recognition, associations, perceived quality and loyalty. A product with strong brand equity sells for more than an identical unbranded one because of what the brand means to customers. This is why the world's leading brands are valued at enormous sums on top of their physical assets.

Building and maintaining a brand is expensive, slow and uncertain, and for a genuine commodity bought purely on price, differentiation may not stick - the spend raises cost without raising what customers will pay. So brand investment is worthwhile only where the firm can create a real, perceived point of difference that the target segment values and will pay for, and can sustain the investment. The exam rewards conditioning the verdict on achievable, valued differentiation and the firm's ability to fund it, rather than assuming branding always pays. A brand also carries risk: it concentrates reputation, so a scandal or quality failure can damage the whole brand at once.

State two benefits to a firm of having a strong brand. [2 marks]

Explain how product differentiation can reduce a firm's exposure to price competition. [4 marks]

Analyse why investing in a brand might not be worthwhile for every business. [6 marks]