Unique Selling Proposition (USP) and Penny Stocks - dummies

Unique Selling Proposition (USP) and Penny Stocks

By Peter Leeds

Consider the USP when researching which penny stock is right for you. The unique selling proposition (USP) is the value that a product or service offers to its customers that can’t be matched by any offerings from the competition. Think of it as the “only,” the “first,” the “leading,” the “cheapest,” or the “loudest” whatever.

For example, the fastest car available has the USP of speed, and if the boast is legitimate, competitors will never be able to claim that same USP. Enter the customer who wants to buy the fastest car, and he will be looking in the direction of that particular company.

Every company should have a USP to help them stand out among all the marketing noise consumers are faced with every day. Just about all businesses have a USP, whether they recognize it or not. If a business doesn’t leverage a strong USP, it may have a harder — and more expensive — time capturing prospects and converting them into customers.

Done properly, leading with a strong USP can represent a tremendous competitive advantage for a company; as a matter of fact, it may be the most important part of its marketing strategy. With smaller and newer penny stock companies, a USP takes on even greater significance because they need to generate sales and survive against larger competitors, and an effective USP is a way to do exactly that.

The quality of a USP can be measured on the following factors:

  • Significant benefit: Only if the USP represents a significant benefit to the consumer will it have any value. A USP may be “the only shoes with 7 percent silk in the laces,” but that’s a very weak boast that will generate no benefit to the purchaser or the company.

  • Unique: Unique is the first part of the USP. A product or service must be something that no other company is offering, or else the whole concept is derailed.

  • Being leveraged: Companies need to communicate the benefits of their USPs to the prospective customers in order to get any value out of them. If a company has a great USP but isn’t marketing it, they aren’t leveraging it.

  • Easily communicated: Simple ideas are much more effective. Being the only neurological drug that targets scarred myelin in patients who have been on beta-blockers for less than 12 months but more than 3 months is far too complicated of a message. Being the world’s most expensive licorice is straightforward and clear, with no room for confusion.

Pay attention to the marketing messages you see each day. Watch for companies with USPs and see if you can differentiate the weak ones from the strong ones. This approach may lead you to some potential investments, but it may also help you improve your understanding to apply to your short list of penny stocks when you perform your due diligence.

Superior logistic networks or variety of offerings almost always trump the better product when an upstart goes head to head against engrained competition. Most new business people, and the vast majority of investors, don’t realize that having the best product matters little. In fact, the superior product often fades away, taking the company with it.

Lots of businesses can make a cola that tastes better than Pepsi or Coke. There are better-tasting hamburgers, friendlier gyms, more enjoyable board games, you get the idea. New companies selling these products or services almost always blow their budgets trying to educate the market, but at the end of the day, nobody cares. Consumers do what’s easiest for them or take the familiar route.