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Non-price competition
Non-price competition is a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship". It often occurs in imperfectly competitive markets because it exists between two or more producers that sell goods and services at the same prices but compete to increase their respective market shares through non-price measures such as marketing schemes and greater quality. It is a form of competition that requires firms to focus on product differentiation instead of pricing strategies among competitors. Such differentiation measures allowing for firms to distinguish themselves, and their products from competitors, may include, offering superb quality of service, extensive distribution, customer focus, or any sustainable competitive advantage other than price. When price controls are not present, the set of competitive equilibria naturally correspond to the state of natural outcomes in Hatfield and Milgrom's two-sided matching with contracts model.
It can be contrasted with price competition, which is where a company tries to distinguish its product or service from competing products on the basis of low price. Non-price competition typically involves promotional expenditures (such as advertising, selling staff, the locations convenience, sales promotions, coupons, special orders, or free gifts), marketing research, new product development, and brand management costs.
Businesses can also decide to compete against each other in the form of non-price competition such as advertising and product development. Oligopolistic businesses normally do not engage in price competition as this usually leads to a decrease in the profit businesses can make in that specific market.
Non-price competition is a key strategy in a growing number of marketplaces (oDesk, TaskRabbit, Fiverr, AirBnB, mechanical turk, etc) whose sellers offer their Service as a product, and where the price differences are virtually negligible when compared to other sellers of similar productized services on the same marketplaces. They tend to distinguish themselves in terms of quality, delivery time (speed), and customer satisfaction, among other things.
Although any company can use a non-price competition strategy, it is most common among oligopolies and monopolistic competition, because firms can be extremely competitive. Firms will engage in non-price competition, in spite of the additional costs involved, because it is usually more profitable than selling for a lower price, and avoids the risk of a price war.
Non-price competition often occurs in oligopoly, where few firms dominate the market. Due to the little or few firms in the market, these firms tend to compete in non-price measures to distinguish themselves. Such competition would be otherwise known as quality competition where oligopolistic firms depend on their quality improvement intensities to survive. In order to distinguish themselves well, these firms can compete in price, but more often, oligopolistic firms engage in non-price competition because of their kinked demand curve. In the kinked demand curve model, the firm will maximize its profits at Q,P where the marginal revenue (MR) is equal to the marginal cost (MC) of the firm. Hence, a change in MC would not necessarily change the market price, implying rather stable and sticky market prices.
Monopolistic market structures also engage in non-price competition because they are not price takers. Due to having rather fixed market prices, leading to inelastic demand, they engage in product differentiation. Monopolistic markets engage in non-price competition because of how the market is designed where the firm dominates the market. In order to sustain in the market, they have to innovate and improve on their product development to appeal to consumers. The new trade theory suggests that the model of monopolistic competition plays a big role in explaining trade trends in trade patterns where product development drives product differentiation. Under monopolistic competition, firms engage in non-price competition to innovate and further boost their brand image.
There are two main branches of non-price competition. This is where firms branch out to create new avenues for themselves to remain competitive in a market where prices are rather sticky. Such streams of non-price competition include product differentiation and/or development and advertising and/or promotion.
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Non-price competition AI simulator
(@Non-price competition_simulator)
Non-price competition
Non-price competition is a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship". It often occurs in imperfectly competitive markets because it exists between two or more producers that sell goods and services at the same prices but compete to increase their respective market shares through non-price measures such as marketing schemes and greater quality. It is a form of competition that requires firms to focus on product differentiation instead of pricing strategies among competitors. Such differentiation measures allowing for firms to distinguish themselves, and their products from competitors, may include, offering superb quality of service, extensive distribution, customer focus, or any sustainable competitive advantage other than price. When price controls are not present, the set of competitive equilibria naturally correspond to the state of natural outcomes in Hatfield and Milgrom's two-sided matching with contracts model.
It can be contrasted with price competition, which is where a company tries to distinguish its product or service from competing products on the basis of low price. Non-price competition typically involves promotional expenditures (such as advertising, selling staff, the locations convenience, sales promotions, coupons, special orders, or free gifts), marketing research, new product development, and brand management costs.
Businesses can also decide to compete against each other in the form of non-price competition such as advertising and product development. Oligopolistic businesses normally do not engage in price competition as this usually leads to a decrease in the profit businesses can make in that specific market.
Non-price competition is a key strategy in a growing number of marketplaces (oDesk, TaskRabbit, Fiverr, AirBnB, mechanical turk, etc) whose sellers offer their Service as a product, and where the price differences are virtually negligible when compared to other sellers of similar productized services on the same marketplaces. They tend to distinguish themselves in terms of quality, delivery time (speed), and customer satisfaction, among other things.
Although any company can use a non-price competition strategy, it is most common among oligopolies and monopolistic competition, because firms can be extremely competitive. Firms will engage in non-price competition, in spite of the additional costs involved, because it is usually more profitable than selling for a lower price, and avoids the risk of a price war.
Non-price competition often occurs in oligopoly, where few firms dominate the market. Due to the little or few firms in the market, these firms tend to compete in non-price measures to distinguish themselves. Such competition would be otherwise known as quality competition where oligopolistic firms depend on their quality improvement intensities to survive. In order to distinguish themselves well, these firms can compete in price, but more often, oligopolistic firms engage in non-price competition because of their kinked demand curve. In the kinked demand curve model, the firm will maximize its profits at Q,P where the marginal revenue (MR) is equal to the marginal cost (MC) of the firm. Hence, a change in MC would not necessarily change the market price, implying rather stable and sticky market prices.
Monopolistic market structures also engage in non-price competition because they are not price takers. Due to having rather fixed market prices, leading to inelastic demand, they engage in product differentiation. Monopolistic markets engage in non-price competition because of how the market is designed where the firm dominates the market. In order to sustain in the market, they have to innovate and improve on their product development to appeal to consumers. The new trade theory suggests that the model of monopolistic competition plays a big role in explaining trade trends in trade patterns where product development drives product differentiation. Under monopolistic competition, firms engage in non-price competition to innovate and further boost their brand image.
There are two main branches of non-price competition. This is where firms branch out to create new avenues for themselves to remain competitive in a market where prices are rather sticky. Such streams of non-price competition include product differentiation and/or development and advertising and/or promotion.