Firms compete in the industry by lowering their prices so that customers choose their products over those of their competitors. Non-price competition, for example, makes modifications to its design, quality, and services to meet the market structure. Imperfect markets or oligopoly firms are common with the non-price competition. This article will help you comprehend the primary difference between price and non-price market competition with some examples. Also, you’ll get to know the upsides and downsides that relate to the non-price competition.
What is Non-Price Competition?
Non-price competition is a market strategy in which only a few firms compete with one another and price is not a factor, whereas the sole factor at play in price competition is price. Non-price competition occurs when businesses compete for the same clients without engaging in price competition to improve sales of a product or service. This type of competition does not consider pricing as the most important, but rather attributes such as product features, quality, good artistry, and services. Advertising, product development, coupons, and other forms of non-price competition all fall under this category.
Such a plan aids in the promotion of a business’s goods and services. Prices aren’t lowered in non-price competition, which is in stark contrast to price competition. However, businesses tend to avoid price wars by following non-price competition. They also use product differentiation and product variation techniques to convince buyers that their products are superior to their competitors. As a result, businesses all over the world have chosen either price competition, non-price competition, or a combination of the two. Now let’s see the differences between price and non-price competition
Difference between Price and Non-Price Competition
- Firms compete in price competition by adjusting the prices of their products and keeping the demand curve constant. Non-price competition, on the other hand, implies product modification and demand curve shaping.
- Firms compete in price competition by adjusting the prices of their products and keeping the demand curve constant. Non-price competition, on the other hand, implies product modification and demand curve shaping.
- There are no additional costs associated with price competition. The only thing that matters is the price. But in non-price competition, corporations must spend money on marketing research, promotional expenditures, sales promotion, hiring more employees, and so on. Despite these expenses, businesses like this type of competition since it allows them to charge a higher price for their products.
- In price competition, the only thing that matters is price. Firms compete in the industry by reducing the prices of their products to be preferred over those of their rivals. In contrast, in non-price competition, firms tend to alter their product design, quality, and other aspects of their offerings. They need to work hard to make their items seem more appealing to their customers.
- Lastly, in non-price competition, innovation is required, whereas, p in price competition, innovation may or may not be present.
What are the Common Strategies for Non-Price Competition?
#1. Quality:
Non-price rivals frequently rely on the quality of their products to differentiate themselves from the competition. Higher-quality workmanship often entails higher prices, but customers may be willing to pay more if they know they’re getting the greatest product on the market.
#2. Adaptability and innovation:
New product development is critical for keeping non-price competitors at the market’s forefront. Consumer tastes, preferences, and demands are always evolving. Non-price competition businesses regularly put out new product features and can fast pivot to new demographics to alter their demand curve.
#3. Customer service:
A company’s reputation is everything, and what a consumer identifies with a particular brand name can make or break their loyalty. Companies that use a non-price competition approach should prioritize customer pleasure in order to increase brand loyalty. After-sales assistance, such as extended warranties, free repairs, or free consultations, is frequently included in non-price competition strategies.
#4. Rewards:
Loyalty cards, free delivery, and free gifts are all promotional expenditures that can entice customers to pay a greater price. If their competitors do not provide the same service, a delivery business that can offer free next-day delivery can normally charge a higher fee.
#5. Sales tactics:
Non-price competitors rely on marketing channels such as social media posts, email marketing, and commercial commercials to showcase unique selling points and sales deals.
Examples of Non-price Competition
#1. Subsidized Delivery Services
In non-price competition, Amazon has been proactive in this regard. It has successfully influenced consumer behavior by giving free delivery. Amazon is boosting its market share by acting almost as a separate line item. There is no need for people to leave their houses to have packages shipped to them.
To sell their goods, even major supermarket chains like Sainsbury’s and Tesco are attempting to use this strategy. Customers pay a higher amount than the company can afford to deliver their orders. However, if they increase the cost of delivery, they run the risk of losing clients.
Tesco and Sainsbury’s are also putting money into online grocery delivery. Customers are paying a premium for delivery services, but supermarkets don’t want to risk losing market share by raising the cost of delivery
#2. Free After-sales Services
After-sale management is a critical responsibility for every business. This is a means of establishing consumer confidence and respect by offering free after-sales service. Businesses are increasingly reaping the benefits of this opportunity. After-sales support for some products, such as TVs or cars, can be a factor in gaining customers’ trust. If done correctly, it can be a lucrative part of the business. In the case of Apple Care, which provides a three-year warranty, the cost is high
In addition to a three-year guarantee, Apple Care provides consumers with free after-sales servicing for any repair that is relevant to the product they purchased.
#3. Adaptability and Agility
Businesses that don’t modify their business models to changing market conditions may find themselves at the bottom of the barrel. On the other side, if the market has undergone several changes, it can be extremely detrimental to the organization if it continues to use the same model. Adaptability and innovation are the only things that matter in such a situation. No firm can survive nowadays without a presence on the Internet.
#4. Customer Loyalty
All businesses need to cultivate customer loyalty to succeed. Because of this, advertising can be a huge help to companies when it comes to marketing their brand. People begin to put their faith in a brand after constant exposure to its advertisements. The higher the brand loyalty, the higher the entrance barriers.
It is safe to say that Coca-Cola and Pepsi are household names. Anyone trying to compete with them in the cola business now finds it nearly impossible.
#5. Customization
Many businesses now provide products that can be customized to meet the specific requirements of their clients. This is an excellent marketing strategy for creating distinct items and allowing buyers to choose from a wide range of alternatives. For example, sugar-free, gluten-free, and vegan products are likely to be offered by corporations to cater to the needs of a specific demographic. In addition to the standard length, color, and size options, customers can now customize their purchases.
#6. Loyalty card
Customers that rack up points or spend a lot of money are rewarded with “rewards” in the form of loyalty cards. Airmiles are a promotional tool used by airlines to promote customer loyalty. Loyalty cards like Tesco Points or Nectar are used by supermarkets to keep customers coming back. Loyalty cards like Tesco points/Nectar are used by supermarkets to keep customers coming back
#7. Direct mailing
To keep consumers, you can collect their email addresses and email-targeted promos and news about new features/products. Customers who have been with a company for a long time may be eligible for discounts or products that aren’t offered to the general public.
#8. Pay for the best employees.
In some industries, success may be entirely dependent on the caliber of the workforce. Restaurants, for example, may wish to hire the best chef. Football clubs have the best players and managers. In other industries, corporations may work hard to keep employees motivated by offering them a stake in the company’s success through share employee schemes.
Non-price Competition in Different Market Structures
Non-price competition is usually seen in two types of market structures, namely: oligopoly and monopoly
The Oligopoly
Non-price competition in oligopoly firms is often thought to be price-makers, yet they wield far more market power than monopolists do. This affects their pricing and non-pricing policies because there are only a few close competitors who could cooperate to fix prices or compete. Oligopolies provide companies with the power to set their prices, which can have an impact on the market’s overall cost.
When competing in oligopolistic markets, firms have a high degree of uncertainty due to their interdependence. As a result, there is a high potential for collusion.
It’s a market structure in which just a small number of businesses compete with one another. Either distinctive or homogeneous/standardized products are sold by these companies, depending on the sector. In addition, their items are easily distinguishable by customers from similar ones of a similar nature. It’s commonplace in most businesses because only a few firms hold sway over the market. However, they get a kink in their demand curve when they follow the non-price competition. Non-price factors must be used to compete in this situation, which means that the price remains constant.
Monopolistic
Firms that are monopolies have a lot of market power since they set the prices. Monopolists can raise their prices without worrying about what their competitors would do. A monopolist, on the other hand, cannot force customers to buy their items and must consider market demand. A price increase might be counterproductive if demand is elastic, as overall revenue will decrease following a price increase.
Low entry barriers and a high number of businesses are hallmarks of this market structure type. Based on product differentiation and development, each of these companies can determine its prices.
They can raise their prices by convincing their customers that their products have a unique selling point. So, despite the low entry barriers, corporations have some market power. Because of this, non-price competition works well in monopoly rather than Oligopoly systems.
Pros of Non-Price Competition Strategies
This style of marketing effort has several advantages which include:
- Social media posts, efficient internet advertising, and direct sales from the manufacturer are all examples of better sales strategies.
- a rise in the standard of the goods
- Different product presentations for different demographics. When a product is presented differently for men and women, for example, sales may rise in non-price competition.
- Better recognition of the brand. There is a lot of value in brands because they help people make better decisions.
Downsides of Non-Price Competition Strategies
Using non-price competition tactics can benefit firms with significant market domination, but consumers should beware of the downsides. Non-price competition techniques, for example, may offer the impression of a competitive market, whereas, in reality, oligopoly firms rely on each other to maintain their prices. When it comes to product quality, it’s unclear whether one company’s product is superior to its competitor’s, despite marketing campaigns suggesting otherwise. In contrast to price, non-price competition methods make it more difficult for consumers to determine whether or not one brand is superior to another.
What Companies Use Non-price Competition?
Non-price competition is a key tactic in marketplaces where vendors sell their services as a product, such as Airbnb, Fiverr, oDesk, TaskRabbit, Mechanical Turk, and others. Suppliers in these marketplaces tend to differentiate themselves in terms of client satisfaction, delivery speed, quality, etc.
Is non-price competition good for consumers?
The non-price competition enables businesses to compete without lowering their pricing. Thereby persuading customers to buy a product by making it appear different or superior to competing products.
Non-Price Competition FAQs
What are 4 types of non-price competition?
Marketing covers several techniques (centered on the 4Ps), such as product differentiation, advertising, promotion, and distribution.
What is non-price competition in oligopoly?
An oligopoly market is identified by the absence of price competition. Product differentiation causes a lack of pricing competitiveness. Non-price competition exists in the event of a distinct oligopoly.
How can oligopolists prevent price wars?
Price competition in oligopolies may result in a price war in which all companies lose, hence oligopoly management prefers to avoid competing on price. Instead, they compete in other ways, such as product differentiation and efficiency improvement.
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