Price competition. Non-price competition in a market economy

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Price competition occurs when competing firms use price policy as their main lever. competition. Moreover, it can be carried out either directly, openly, through a public statement about reducing prices for their products, or hidden, when the price reduction threshold is not subject to publicity. IN Lately price competition is increasingly giving way to price competition due to changes in the nature of the vast majority of markets and their transformation into buyer's markets.  

Price competition involves selling goods or services at prices lower than those of competitors, due to a temporary decrease in profits. Thus, in order to win or retain customers, firms can use various types of discounts compared to the list price for various categories buyers (for example, large firms that have a foothold in the market for some time may refuse to make a profit altogether and, in order to block the invasion of new competitors, set so-called limiting prices on their products, i.e. prices below the minimum point of the curve of long-term average costs of potential competitor.  

Price competition occupies an important place in the trade of perfumes and cosmetics. Companies strive to offer consumers prices that are not only acceptable to them, but also, if possible, lower, even if only slightly, than competitors’ prices for similar products.  

Price competition involves selling goods at lower prices than competitors. A price reduction is theoretically possible either by reducing production costs or by reducing profits. Small and medium-sized companies often agree to small profits to stay in the market. Large monopolies can afford to give up making profits altogether for some time in order to ruin their competitors and force them out of the market with the help of cheap products.  

Price competition involves selling goods and services at prices that are lower than those of a competitor. A price reduction is possible either by reducing costs or by reducing profits, which only large firms can afford.  

Price competition plays a secondary role in the textbook market. First, unlike most markets, in this case someone else chooses the product for the consumer.  

Price competition comes in two forms.  

Price competition can be started not only by a company with a dominant position in the market, but also by a small enterprise in order to survive in a competitive environment.  

But price competition can also turn into price wars. By lowering the price slightly, one of the companies can attract the majority of buyers.  

There is strong price competition among sellers.  

Locals win in price competition small firms, which, taking advantage of the fact that prices on the Norwegian market are 15 - 20% higher than in other European countries, provide customers different types discounts  

An example of price competition (Bertrand competition) with power restrictions is illustrated in Fig. 7.3. In the figure, D(p) is the demand curve. The two vertical lines represent the capacity of each firm. The third vertical line k k2 reflects the total capacity in the industry.  

To understand the mechanism of competition great importance has the correct identification of the reasons due to which it is possible to circumvent. In business practice, it is customary to single out price and non-price factors, as well as the corresponding types of competition, as such reasons.

Price competition is a form of competition based on lower (cost) products or services offered. In practice it is used large companies, focused on mass demand, firms that do not have sufficient strength and capabilities in the field of non-price competition, as well as during penetration into markets with new products, while strengthening positions in the event of a sudden exacerbation of the problem. With direct price competition, firms widely announce price reductions for products produced and available on the market. With hidden price competition, it is brought to the market new product with significantly improved consumer properties, the price increases slightly. An extreme form of price competition is “price wars” - ousting competitors by consistently reducing prices in anticipation of the financial difficulties of competitors offering similar products, the cost of which is higher.

Non-price competition is widespread where quality, its novelty, design, packaging, corporate identity, subsequent service, and non-market methods of influencing the consumer play a decisive role. factors indirectly related or completely independent of price. In the 80-90s, reduced energy consumption and low metal consumption, complete absence or low pollution, took the leading place in the list of non-price factors. environment, crediting of returned goods as a down payment for a new one, advertising, high level warranty and post-warranty service, level of related services.

Sony on initial stages mass marketing of its products on the Russian market faced the problem of non-price competition. The problem was that according to existing internal rules guarantees for products sold in Russia, consumers can return faulty equipment only after five attempts to repair it. Russian trade rules, however, allow the consumer to return goods as soon as defects are discovered. Everyone obeys these rules trading companies on Russian territory. In order to confidently increase sales volumes, Sony not only brought warranty rules in line with regional requirements, but also significantly reduced the warranty period for the most popular products. As a result, the company strengthened its position in the non-price area of ​​competition.

Illegal methods of non-price competition include industrial espionage; poaching specialists who know production secrets; release of counterfeit goods.

In general, unfair competition can be classified as one of the types of non-price competition, since it creates advantages in the non-price spectrum through actions that are contrary to fair customs in industrial and commercial affairs. In accordance with Art. 1Obis of the “Paris Conference for the Protection of Industrial Property” this includes all actions capable in any way of causing confusion regarding the enterprise, goods, industrial or commercial activities of a competitor; false statements during implementation commercial activities capable of discrediting an enterprise, goods, industrial or trading activities competitor; indications or statements, the use of which in the conduct of business may mislead the public regarding the nature and method of manufacture, properties, suitability for use or quality of the product. At the same time, ignorance, delusion and other similar reasons are not justifying circumstances. Russian “Law on Competition. ..” similarly interprets unscrupulous .

Typically, the presence of powerful non-price competition is associated with high level development of market relations. In most stable markets, economically developed countries non-price competition is the most common form of competition. Against, Russian market are more often characterized by the predominant development of price competition. The low solvency of consumers makes it possible to compete effectively through lower prices.

Since the competitiveness of a product is determined by its ability to withstand competition, competitiveness factors directly follow from the methods of competition. According to the methods of implementation, competition is divided into price and non-price.

Price competition

Such competition involves selling products at lower prices than competitors.

• 1. Offering products at a lower price than competitors means enterprise use latest technology , allowing to produce more products per unit of time and reduce the level of resource consumption, which ensures a lower level of production costs. Timely renewal of the active part of fixed assets helps prevent the onset of obsolescence of the first type, this, in turn, maintains price competitive advantages, preventing increases in product prices. Integrated mechanization and automation of production contribute to the release work force and reduce the share of labor costs in the structure of product costs.
• 2. Another factor that helps reduce product costs, and therefore a possible reduction in prices, is the organization of logistics at the enterprise. The success of companies that do not practice building and managing a well-functioning logistics supply chain may be questioned as competition becomes more intense. An efficient supply chain ensures the movement of materials and inventory in a manner that minimizes the creation of unnecessary buffers, such as excess inventory. finished products in a warehouse, at manufacturers or wholesalers, i.e. avoiding money being “tied up” while the product is not sold.
• 3. Speaking about price competition, it should be noted that the buyer is interested in the full costs of purchasing and operating the product, i.e. we are talking about the consumption price, which includes the selling price and operating costs over the entire service life of the product.

Non-price competition

Non-price competition is based on distinctive feature products compared to competitors.

Non-price factors of competitiveness include: ensuring product quality, brand (product recognition), organization of product sales channels, advertising, brand, after-sales service, product novelty.

In modern market economy special meaning In ensuring the competitiveness of products, parameters related to the sales process, logistics and reduction of distribution costs, and after-sales service are acquired. The competitiveness of products is manifested through the image of the company, i.e. buyers' perceptions of this company based on its business reputation as a manufacturer and supplier.

When talking about product quality, we highlight such parameters as technical, aesthetic and regulatory.

1. To the group technical The parameters that are used in the analysis of competitiveness include purpose parameters and ergonomic criteria.

Destination Options determine technical properties products, their areas of application and the functions they are intended to perform. They allow us to judge the content of the beneficial effect achieved through the use of this product under specific conditions of consumption. Assessing the technical level of a product is especially important for industrial and technical goods and durable goods. Destination parameters generally characterize the possibilities of using products in a particular country.

Ergonomic criteria characterize products in terms of compliance with properties human body in the process of performing labor operations and interacting with the machine. They are divided into hygienic, physiological, and psychological.

• 2. Aesthetic criteria serve to model the external perception of the product; they reflect precisely those external properties that are most important to the consumer.
• 3. In addition to the requirements put forward by each individual consumer, there are requirements common to all products that must be met. This regulatory parameters that are established by current international (ISO, IEC, etc.) and regional standards, national, foreign and domestic standards, current legislation, regulations, technical regulations exporting country and importing country, establishing requirements for products imported into the country, standards of manufacturing companies, patent documentation. For example, electrical devices must operate at the voltage supplied to the network and meet fire and explosion safety requirements, and their design is determined by the conditions of the process being carried out.

Patent legal indicators determine the patent purity of products (the degree to which the product embodies original technical solutions, not covered by patents in a particular country). If at least one of the requirements is not met, the product cannot be put on the market. Standard indicators include: the share of finished products, parts and components of local production in the ratio established by law; the degree of unification of products and the use of standard parts in them, etc. If the result of the analysis of regulatory parameters is positive, they proceed to the analysis of competitiveness in specific markets.

• 4. Great value in ensuring the competitiveness of goods, commercial criteria (organizational and commercial conditions for sale) are acquired, which can be conditionally divided into methods of promoting goods and factors of product distribution: the size of discounts on prices, delivery times, the volume of services provided to customers in connection with the supply of goods, forms and methods of trade in specific markets.
• 5. Image is the perception of a company or its products by society. An effective image has a huge impact on consumer perception of a product: (i) it conveys a unique “message” that underlies consumer propositions about the quality and benefits of the product; (2) he will convey this message in a specific way, so that he is not influenced by similar messages from competitors; (3) it carries an emotional load and therefore affects not only the mind, but also the heart of the consumer.

Developing a strong image requires creative approach and hard work. An image cannot be introduced into people's minds just overnight, by watching a commercial. It must be constantly disseminated through all available channels of communication with consumers. Companies that are inconsistent in maintaining their image leave consumers confused and thus may draw their attention to competitors' messages. The image of a product depends on the image of the organization that produces it, corporate image can be seen in business reputation, in the company name, in the emblem, symbols, employee uniforms and much more.

There is a lot of work involved in positioning the organization and products, creating their image; advertising that is aimed at:

• (1) informing potential customers about the company and its products;
• (2) convincing potential customers that the products offered by the company represent best solution customer requests;
• (3) reminding consumers of available options to meet their needs.

The most valuable quality of modern marketers is the ability to create a brand. The famous marketing scientist F. Kotler defines a brand as follows: a name, concept, sign, symbol, design or combination thereof, intended to identify the goods offered by the seller. A trademark conveys information about a product to the buyer, for example, the Mercedes trademark speaks about such properties of a product as “well-designed”, “reliable”, “prestigious”, “expensive”. The best brands carry a guarantee of quality. The consumer perceives the brand as an important part of the product, so the use of the brand can increase its value, for example, most consumers will perceive a bottle of Opium perfume as a high-quality expensive product, but they will consider the same perfume in a bottle without a name to be of lower quality, even if the aroma of the perfume is exactly the same .

Famous brands have purchasing privileges. They may be preferred over substitute products, even if they are offered at lower prices. It is important that the consumer remains loyal to the brand, and not to the manufacturer. In the field of electronics, one can name such successful brands as Panasonic, JVC, Hyundai, Goldstar, Samsung.

Companies that create branded products are more reliably protected from competitors in promoting them to the market. But even if your company and products have an excellent image, an advertising program that gives a very large influx of buyers, it is important to determine the factors commodity circulation , create and implement, here are competitive advantages. We are talking about sales channels, forms and timing of deliveries and service. Each intermediary that brings the product closer to the final consumer represents one of the levels of the product distribution channel. There are zero-level channels, one-level, two-level, and three-level distribution channels.

Channel zero level consists of a manufacturer who directly sells its products to the end consumer. Examples include peddling and parcel trading.

Single level a channel includes a single intermediary, such as a retailer. IN two-level There are two intermediaries in the sales channel. In the market for consumer goods, they are usually represented by wholesalers and retailers. Three-level the channel includes three intermediaries. For example, in the meat processing industry, a small wholesale trade link appears between wholesalers and retailers. Small wholesalers buy products from distributors and sell them in small quantities to enterprises retail. There are also more extensive distribution channels for products.

A competitor's lack of a retail network is seen as its weak point. The retail network is a place of direct contact with both consumers and the products sold. Organizing retail trade, especially at the initial stage, is associated with high costs, but there are certain market conditions, which force us to open Retail Stores(dealership centers):

• (1) the market is poorly studied, and the manufacturer does not have financial resources for research and sales work;
• (2) the scope of pre-sales and after-sales services is insignificant;
• (3) the number of market segments is small;
• (4) the product range is wide;
• (5) product features determine the small frequency of one-time purchases.

In case of large scale production and promising business It is advisable to have two-level distribution channels - wholesale and retail trade in goods.

A serious criterion for competitiveness is the speed of order fulfillment, the possibility of urgent delivery of products and the efficiency of the service department. Favorable offers for the supply of products increase our competitiveness. Western marketers believe that the most main reason customer departure - unsatisfactory service and the fact that most people are willing to pay more (up to 10% or more) for good service. In some cases good service maintenance allows you to reduce the price of consumption (weight of costs associated with both the purchase of products and their use during life cycle). Some manufacturers offer credit for purchases at a low interest rate, provide a longer warranty or provide free service and Maintenance during operation. Recently, this practice has become widespread in the automotive industry, among manufacturers of durable products and small electrical appliances. In competition in the field of services and the provision of additional services, companies producing cell phones are trying to secure a competitive advantage for themselves.

For the first time, people began to talk seriously about competition only after the fall of the Iron Curtain, which was associated with a significant decrease in the competitiveness of enterprises. Since then, research in this area has been actively conducted, during which many factors of the competitiveness of economic entities have been revealed.

The concept and essence of competition

Competition is considered the center of gravity of the entire system of market activity, as well as a form of interaction between producers in relation to the formation of the price aspect, production volumes, as well as the general situation on the market. Undoubtedly, it is competition that speeds up the process of promoting goods and makes it possible to provide the market with products in full.

The process under consideration consists of competition between individual subjects of the market structure for the best conditions in terms of profit for both production and sale of products. It is important to note that in a market economy such clashes are inevitable. This situation can be fully justified by the following factors:

• A large number of absolutely equal economic entities on the market.
• Their isolation in terms of carrying out their activities.
• Dependence of these entities on market conditions.
• Confrontation between subjects to satisfy customer demand.

Types of competition by nature of development

Today are fundamentally various forms the category under consideration. Thus, when using the first option, it is appropriate to change product prices in order to ensure maximum demand. When the presented process is reflected on the demand curve, one can observe that selling firms move along it, either reducing or increasing the price of their goods. But the winner is the entrepreneur who has all the costs of producing the product.

The intensity of price competition is primarily influenced by the interest rate, the degree of economic risk, product differentiation, and the limitation of the power of sellers in the market.

It involves relegating the role of price to the background, while fundamentally other factors become the main component of the “battle”. Among them unique properties products, their technical reliability, as well as high quality.

Why are price fights unprofitable today?

It is important to note that modern conditions of a market economy have made price competition unprofitable, especially for small companies, because compared to Western giants they have insignificant financial resources, therefore, they are not able to sell their goods at reduced prices for a long period of time. Thus, a price war can turn into a real struggle of financial attrition, which hits hard the most vulnerable parts of the industry, often already weakened by the crisis and endless non-payments.

In addition, the demands of modern consumers compared to previous periods have become much higher, which has resulted in a wide variety of products on the market, their high quality and overall attractiveness. And this is it non-price competition. It is important to note that it costs businesses much less than the price. The main thing here is the company’s interest and the search for interesting ideas.

The main forms of non-price competition include the following:

• Introduction of an innovative product to the market, called product differentiation. It can be passive in nature, when supply follows a change in effective demand, or active, involving the imposition of demand already modeled by entrepreneurs through forecasting, market conditions and expert information.
• involves improving the quality indicators and consumer properties of products, which is appropriate in the following cases: the company intends to expand the list of product properties and market segments for the sale of goods; the company seeks to increase its authority in the market or is trying to achieve entry into a larger market segment; the seller intends to improve consumer properties product.
• Differentiation of product sales channels, which should include types of sales and after-sales services. These actions are aimed solely at organizing the sale of the product by attracting new categories of consumers or encouraging them to re-purchase.

The following sets of methods inherent in the corresponding competitive actions of economic entities are non-price:

• Maintaining one’s own status in established sets of values, as well as entering new chains of similar values. In this case, companies seem to continue to compete around the product, however, it is not consumers who enter into relations with them, but counterparties, including partners in running a common business.

• , causing processes of influence and pressure on both direct (real) and indirect (perceived) competitors. This should include propaganda against direct competitors, collecting important (even confidential) information into one set, joining a competing company with the goal of suppressing it, and so on.
• Methods by which the company maintains and increases its own authority in society, which should include the establishment of individual standards of behavior with competitive companies, participation in non-commercial events, or the use of PR communications to improve the company’s image.

Non-price competition in practice

As it turned out, price and non-price competition have fundamental differences, which determine the nature of the behavior of one or another company in order to increase demand for its product. It was noted in previous chapters that modern conditions eclipsed the price category non-price competition. Examples Such situations are quite numerous. So, any research involves first defining goals, then building a plan, analyzing data and, of course, summing up the results.

Let's say the central object of research is men's clothing. The responsibilities of a marketer include studying the relevant category of the population in relation to the main preferences in terms of wardrobe and other circumstances influencing the purchase (income, opinion of close relatives), after which tasks are formed, as a result of which the specialist finds out the main preferences of men - not an easy task, but the company that can carry out all the above operations competently and efficiently will certainly be the winner.

Federal Agency for Education of the Russian Federation

Kazan State Technological University

Coursework in the discipline "Marketing"

“Price and non-price competition”

Kazan 2007

Introduction

Chapter I The essence and significance of price and non-price competition.

Basics of Competition

Concept and types of competition

Competition methods

Application of marketing in competition

Use of marketing in different conditions competition

Three strategies without which you cannot win the competition

Ways to win customers

Pricing Strategies

Non-price promotion methods

Chapter II. A research program to determine the influence of price and non-price competition methods on consumer choice.

Determining the influence of price on consumer choice using the example of the dairy market

Determining the influence of non-price competition methods on customer choice using the example of the men's clothing market

Conclusion

Bibliography

Introduction

The relevance of research.

Currently, competition, mainly price, is being used more and more often, since more and more new products are appearing in the markets, and mainly price competition is used to penetrate the market with a new product. Competition is also used to strengthen positions in the event of a sudden aggravation of the sales problem.

But methods of price competition are sometimes impossible to apply, and they are replaced in the market by non-price competition. This type of competition is most often used in the car market and the furniture market. In this case, the leading position can be maintained not by reducing prices, but by improving the quality of service, quality of goods, and reducing metal consumption.

It can be concluded that competition provides consumers with choice and a huge number of products nowadays. Competition is currently the most topical issue in any market of goods and services.

Coverage of the problem.

The topic of competition has become widespread both in economic literature and in the marketing literature. Almost any book covers all the basic concepts and types of competition, as well as its methods and ways to win customers. Also, the practical application of competition is very often used nowadays. Almost all markets for goods and services involve one or another type of competition. Competition is well discussed in the books by F. Kotler, E.P. Golubkov, Tim Ambler gives practical research competition. In addition to scientific literature, competition has become widespread in periodicals, where marketing research in various markets is presented and the degree of competition of a particular product is assessed.

Goals and objectives.

Purpose my course work is a more accurate consideration of price and non-price competition, both in its theoretical use and in practical application in the market of goods and services.

Tasks my coursework are:

1. Give more precise definition competition;

2. Consider the types and methods of competition;

3. Consider the use of marketing in competition;

4. Consider pricing methods of competition;

5. Non-price methods of competition;

6. Methods of winning customers;

7. Conduct marketing research competition in the market for goods and services and draw conclusions.

Work structure.

The topic of my course work is “Price and non-price competition.” In my work I will consider:

·Concept, types, methods of competition;

·Use of marketing in competition;

·Methods of winning over consumers;

All these questions will be considered by me within the framework of " Theoretical part", In addition, there will be marketing research within the framework of Chapter II, which is called "Practical part". At the end of my work I will draw conclusions that will be discussed in Conclusion. All my work will be completed list of literature I used.

I chapter. The essence and significance of price and non-price competition.

Concept and types of competition

Competition refers to the rivalry between individuals, economic units in any field interested in achieving the same goal.

Soviet foreign trade organizations and enterprises are forced by force of circumstances to compete in foreign markets with companies selling the same (and not only the same!) goods. This competition inevitably arises from the fact that both our company and its competitors strive to capture the attention of customers and induce them to purchase the product. As K. Marx noted, people acquire goods not because it (the product) “has value, but because it is” “use value” [No. 2 p. 144] and is used for certain purposes, then it goes without saying :

1. that use values ​​are “assessed,” that is, their quality is examined (in the same way as their quantity is measured and weighed);

2. that when different varieties of goods can replace each other for the same purposes of consumption, one or another variety is preferred......;

And, therefore, since we want preference to be given to our product, we are obliged to compete (compete!) with producers of other similar products in achieving this goal.

IN commodity production competition, as F. Engels noted, forces industrialists “to reduce the prices of goods that do not correspond in kind or quantity to this moment social need“, and the need for such a reduction is a signal that they have produced items “that are either not needed at all or are needed in themselves, but were produced in unnecessary, excessive quantities.” Finally, it is competition that leads to the fact that the improvement of machines turns into a “compulsory law”, the neglect of which is extremely expensive for the manufacturer of the goods.

Since competitors can greatly influence a firm's choice of the market in which it will try to operate, it should be noted that competition in the field of marketing can be of three types.

Functional competition arises because any need, generally speaking, can be satisfied in very diverse ways. And accordingly, all products that provide such satisfaction are functional competitors: the products found in a sports equipment store, for example, are just that. Functional competition must be taken into account even if the firm is a manufacturer of a truly unique product.

Species competition – a consequence of the fact that there are goods intended for the same purpose, but differ in some significant way important parameter. These are, for example, 5-seater cars of the same class with engines of different power.

Subject competition – the result of the fact that firms produce essentially identical goods, differing only in the quality of workmanship or even the same in quality. This kind of competition is sometimes called intercompany competition, which is true in some cases, but it should be kept in mind that two other types of competition are usually intercompany as well.

Competition methods

In economic literature, it is customary to divide competition according to its methods into price And non-price, or competition based on price and competition based on quality (use value).

Price competition goes back to those distant times of free market competition, when even homogeneous goods were offered on the market at a wide variety of prices. Reducing prices was the basis by which the industrialist (merchant) highlighted his product, attracted attention to it and, ultimately, won the desired market share.

IN modern world, when markets are monopolized, divided between a small number of large firms that have captured key positions (the IBM company, for example, in the USA owns 70% of the computer market), manufacturers strive, perhaps, to keep prices constant longer, so that, by purposefully reducing costs and marketing expenses, ensure an increase in profits (maximization). In monopolized markets, prices, as economists say, become less elastic.

This does not mean, of course, that modern market“price war” [No. 2 p. 145] is not used - it exists, but not always in an explicit form. A “price war” in open form is possible only until the moment the company exhausts its reserves for reducing mass production and a corresponding increase in the mass of profits. When equilibrium has been established, any attempt to reduce the price leads to competitors reacting in exactly the same way: the positions of firms in the market do not change, but the rate of profit falls, financial condition firms in most cases deteriorate, and this leads to a decrease in investment in the renewal and expansion of fixed assets, as a result, the decline in production intensifies, instead of the expected victories and displacement of competitors, unexpected ruins and bankruptcies occur.

That is why nowadays we often observe not a decrease in prices as scientific and technological progress develops, but an increase in them: the increase in prices is often not adequate to the improvement in the consumer properties of goods, which, of course, cannot be denied.

Price competition is used mainly by outsider firms in their fight against monopolies, to compete with which outsiders do not have the strength and capabilities in the field of non-price competition. In addition, pricing methods are used to penetrate markets with new products (this is not neglected by monopolies where they do not have an absolute advantage), as well as to strengthen positions in the event of a sudden aggravation of the sales problem. With direct price competition, firms widely announce price reductions for manufactured and marketed goods (usually by 20-60%).