A manufacturer of bottled fruit drinks is removing artificial colours from one product line. This increases manufacturing costs by $0.18 per bottle. Its obj...
Question 1 Report
A manufacturer of bottled fruit drinks is removing artificial colours from one product line. This increases manufacturing costs by $0.18 per bottle. Its objective is to appeal to customers who prefer natural ingredients, while maintaining sales in convenience stores.
(a) What is meant by product differentiation? [1]
(b) Identify one way the manufacturer could communicate the change on the bottle. [1]
(c) Explain why the business may be able to raise its price after the change. [1]
Answer Details
(a) Product differentiation is making a product appear different from competing products. [1]
(b) The bottle could carry a “no artificial colours” label. A natural-ingredients logo or revised packaging information would also communicate the change. [1]
(c) Removing artificial colours adds perceived value for customers who prefer natural ingredients. These target customers may therefore accept a higher price. [1]
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