Future Business Leaders of America (FBLA) Advertising Practice test

Which strategy focuses on offering lower prices or improved product features compared to competitors?

1. Cost leadership.

2. Differentiation.

3. Market segmentation.

4. Brand loyalty.

The correct answer is: Cost leadership.

Cost leadership is a strategy that aims to establish a competitive advantage by being the lowest-cost producer in an industry. This approach typically involves offering lower prices compared to competitors, which can attract a larger customer base and generate higher sales volume. Businesses employing this strategy may also make improvements in product features or operational efficiencies to maintain their cost advantage while ensuring that their offerings remain attractive to customers. In contrast, differentiation focuses on creating unique products or services that stand out in the market, which may entail higher prices to reflect those distinctive features. Market segmentation involves targeting specific groups of consumers based on their needs and preferences and is not primarily about pricing strategy. Brand loyalty relates to the attachment and preference customers have for a particular brand, which may lead customers to choose a brand regardless of price differences. Therefore, cost leadership is the most appropriate strategy when focusing on lower prices and potentially improved product features to outperform competitors.