How do sellers benefit from the use of brand names and brand ...

[HCHenry]

How do sellers benefit from the use of brand names and brand marks?

Question 2

Safe Auto advertises its automobile insurance as minimum coverage for minimum budgets. Safe Auto is engaging in
 A) nonprice competition.
  B) demand-based pricing.
  C) competitive pricing.
  D) price differentiation.
  E) price competition.

[ASDFGJLO]

Answer to Question 1

Sellers benefit from branding because each company's brands identify its products, which makes repeat purchasing easier for customers. Branding helps a firm to introduce a new product that carries the name of one or more of its existing products because buyers are already familiar with the firm's existing brands. It facilitates promotional efforts because the promotion of each branded product indirectly promotes all other similarly branded products. Branding also fosters brand loyalty. To the extent that buyers become loyal to a specific brand, the company's market share for that product achieves a certain level of stability, allowing the firm to use its resources more efficiently. Once a firm develops some degree of customer loyalty for a brand, it can maintain a fairly consistent price rather than continually cutting the price to attract customers.

Answer to Question 2

E