Since childhood, a person finds himself in harsh conditions of competition in the most diverse spheres of life. Economic competition can well be attributed to the most severe types of competition , because the card is set and the success and prosperity. In business, there are two types of competition - price and non-price. As a rule, low price really helps to compete, however the role of non-price competition is much more important and allows achieving brilliant results.
How does price competition differ from non-price competition?
Competition is a rivalry of people in different spheres of life, especially in the economic sphere. If to simplify, competitors are sellers from the neighboring shops, each of which beats with others for the client. It is important not only to attract the maximum number of customers, but also to sell their goods or services on the most favorable terms. Experts argue that it is competition that forces modern society to develop at such a fast pace, but it also causes instability in the economy.
The struggle between two or more competitors is carried out in two ways: price and non-price. The difference between them is very significant:
- Price competition is a way of fighting against competitors by reducing the price of their goods or services. As a rule, this kind of competition is used in those markets where demand exceeds supply, or the competition of buyers is quite high, or there are conditions for pure competition (that is, when there are many producers of the same type). This method of dealing with competitors is considered the least effective, because competitors can instantly level prices with you, or throw off even more. From this, both you and your competitors lose potential profit, and financial stability will become an unattainable luxury. Despite all the disadvantages, this method is still applied, especially if you need to introduce the product to a new market. Use this strategy must be very cautious, because it is important to be sure that the price reduction will actually lead to an increase in revenues, rather than reduce them.
- Non-price competition includes more advanced and modern techniques. For example, the allocation of their goods or services from a number of competitors, giving it unique properties. To this end, often produce new products, improve quality, increase investment in advertising, offer additional services and guarantees. Various methods of non-price competition lead to relative financial stability, which allows more efficient management of the enterprise. Another important plus of this policy is the inability of competitors to react immediately to your new events, which undoubtedly gives some head start. In addition, if successful, all investments in non-price methods of competition firms not only justify themselves, but also bring profit.
Features of non-price competition make all enterprises and firms always keep their hands on the pulse and constantly improve, which pushes the economy to development.
Types of non-price competition
In the modern world, at every step you can see various examples of non-price competition. Depending on various factors, the company can choose different ways:
- creation of new technologies, products, services and advertising;
- the cheap copying in a short time of those who create something new;
- increase of quality and assortment, at the expense of which the achieved positions are preserved.
The main costs of non-price competition are the need for investment, and, as a rule, regular and very considerable. However, in most cases they pay for themselves.