2.2.3 types of non-price competition

Question 1

What are types of non-price competition?

Answer 1

• Product differentiation
• Advertising and other promotional methods
• Distribution methods

Question 2

What does product differentiation include? [4]

Answer 2

• Branding
• Packaging
• Advertising
• Product placement

Question 3

What could product differentiation do to the demand curve?

Answer 3

It could shift it to the right, due to the increase in demand from consumers. It could also become more price inelastic if the business can increase consumer loyalty.

Question 4

How can advertising and other promotional methods be used to increase demand?

Answer 4

It can make the brand more known and influence consumer preferences.

Question 5

How can advertising be ineffective for some firms?

Answer 5

It is difficult to know what the effect of increased advertising spending will be, and so some could incur large sunk costs which cannot be recovered.

Question 6

How can distribution methods be used as non-price competition?

Answer 6

It can make demand more price inelastic. It allows for a higher price to be charged so they can maximise their revenue and profit.

Distribution methods are rapidly changing, especially in relation to the digital economy.