2.2.3 Non price competition

Question 1

How do firms non price compete?

Answer 1

Product differentiation. seen commonly in oligopoly markets where they dont compete on price and focus on the product and adding value to make it stand out from competitors. This leads to an outwards shift of the demand curve and prevents any price wars from happening

Question 2

How does advertising/other promotional methods affect demand?

Answer 2

Increased advertising creates the barrier to exit as a sunk cost however they do this to create customer loyalty and for repeat purchases. This may be through loyalty schemes being implemented.
Sales promotions are more short term methods such as BOGOF or free samples to stimulate short term demand.

Question 3

What are distribution methods?

Answer 3

Ways in which the product or service is distributed to the customer from the firm.
There is modern/short distribution channels where the product/service directly goes to the customer or a retailer from the firm.
Then there is long distribution channel methods where there is a middle person between the firm and customer and more than one intermediery. e.g firm to manufacturer to wholeslaer to retailer to customer.