Question

Actions for Discussion Activity #9 Two of the characteristics of a monopolistically competitive industry (market) are ‘product differentiation’ and 'nonprice competition', which give each firm (producer or seller) some control over the product’s (market) price. Consider the Grocery stores in your home town (city),as an example of 'monopolistic competition'. Briefly explain the various ways in which they differentiate their product(s),and engage in various forms of 'nonprice competition'. How effective are these forms of product differentiation and nonprice competition in ensuring that these Grocery stores make economic profits, both in the short-run and long-run?

Answer 1

Various ways and methods through which the grocery stores indulge in the non-price competition are mentioned below:

• They try to highlight the features of their product by different packaging. For example, cookies can be packed in different Jars making them look more attractive so that people can buy those particular products and not other cookies.
• Advertise their product in a different manner like selling some products as organic and free from pesticides and other products as beneficial for health because it has some distinct features.
• Using sponsorships and celebrity endorsement for their products this is generally done by bigger companies and same way followed by small grocers selling those products.
• Selling products of a particular brand name and trying to develop a brand following. As some people look to use products from one particular brand, for example, Nike sportswear.
• They try to promote their products as made by using some new technology and much better than the previous version of the same product.

Above are some ways which are used by different grocers to differentiate their goods from other sellers selling the same product. THeir ultimate goal is to differentiate their goods from others and create a different image for their own product increasing its sale and profit and these methods of product differentiation are very effective.

In the short run, these methods help in product differentiation and in the long run it help in creating a brand image and in the long run brand loyalty.