Types of non-price competition

How does product differentiation impact the demand curve?

Successful differentiation shifts the demand curve rightward (higher demand) and makes demand more price inelastic (stronger consumer loyalty).

What are key methods of product differentiation?

Branding, packaging, advertising, and product placement.

How does advertising impact the demand curve?

It increases demand, raising equilibrium price and quantity in the market.

What is the risk of increased advertising spending?

If ineffective, it results in high sunk costs (unrecoverable expenses).

How does brand loyalty affect price elasticity?

Higher brand loyalty makes demand more inelastic, allowing firms to charge higher prices without losing customers.

How do distribution methods influence the demand curve?

They can make demand more inelastic, enabling firms to charge higher prices or pass on costs to consumers.

Why are distribution methods important in the digital economy?

They are evolving rapidly, affecting pricing strategies and consumer access to products.

What factors influence a firm’s marketing approach?

The nature of the product, target consumers, and market conditions.