Answer to Question #125847 in Microeconomics for jones

Question

Q.4.2 Explain the concept of non‐price competition in the context of the cinema industry using examples to illustrate your answer.

Answer 1

Non-price competition refers to competition between companies that focuses on benefits, extra services, good workmanship, product quality – plus all other features and measures that do not involve altering prices. It contrasts with price competition, in which rivals try to gain market share by reducing their prices. Non-price competition is often adopted by the competing players in a sector in order to prevent a price war, which can lead to a damaging spiral of price cuts.

Non-price competition is a marketing strategy that typically includes promotional expenditures such as sales staff, sales promotions, special orders, free gifts, coupons, and advertising.

Put simply, it means marketing a firm’s brand and quality of products, rather than lowering prices. Most companies across the world are involved in either non-price competition, price competition, or both. For example Cinema A can offer a coupon on anyone who buys more than two tickets for a film so that to lure more customers. This will have drawn away customers from Cinema B which does not have such an offer. However, both charge the same but customers will prefer to go to Cinema A because its offering a coupon