Price competition: types and strategies. Non-price competition

Competition methods are methods common in economics that allow an enterprise to market conditions attract the attention of customers, develop, exist successfully. It is customary to divide currently known methods into economic and conditional economic. The first suggest appropriate methods of behavior, and the second - other possible attempts to influence the position that the company currently occupies.

Economic methods of competition

There are two key approaches: playing with costs, with prices. Influence through prices is an option when a company resorts to a floating pricing policy. The main task is to force the opponent to leave this niche. Often, to achieve a goal, an enterprise sets the price of a product significantly below the norm. The competition method produces the greatest effect if the decline occurs sharply and is unpredictable for rivals. The company adheres to this pricing policy until it succeeds in squeezing the competitor out of the niche. Equally satisfactory are the options when the opponent completely stops activities, and when he chooses a different direction as an attempt to avoid barony.

If the applied methods of competition gave the desired result and the competitor was removed from the market, prices can be restored to their previous level. In some cases, an enterprise can afford to raise the cost above the previous standard. This allows you to compensate for the losses that were associated with the period of competition.

Advantages and disadvantages

The weakest side of the described approach to eliminating rivals is the fact that the opposite side can also resort to a similar line of behavior. Competition in the market is often unpredictable, and an accurate assessment can only be made in advance if there is extensive and correct data on the financial condition of the competitor.

The winner remains with those who have a large supply of money at the start of the “battle”. As soon as the first signs of competition appear in the niche where the enterprise operates, it is necessary to tune in to a fight from which only one can emerge victorious. However, as practice shows, only large monopolies currently seriously compete in this way, while most medium- and small-sized companies simply adjust to the generally accepted price level. For such market participants, other forms and methods of competition are relevant.

Costs as a way to fight an opponent

The main idea of ​​this method of competition is to reduce to a minimum the costs associated with the process of production and sales of products. Enterprises are resorting to all legal tools that allow them to at least slightly reduce the cost component of their business. It is taken into account that the production of the same product different ways can be very costly or vice versa. Influenced by technological features production, automation of work lines, streamlined workflow. It becomes very important for an entrepreneur to establish an organized working day - this is one of the methods of non-price competition.

In an effort to minimize costs in the production and sales process, many try to use the most inexpensive raw materials. This often leads to low quality of the finished product, which, as practice shows, does not stop companies that are immersed in competitive methods in an attempt to win a place in the market.

At any cost!

A widespread practice of reducing costs associated with the production and sales process is to attract cheap labor. This option often goes against the current legal norms of the country. This is not only about competition law, but also about employment rules. Enterprises hire illegal, semi-legal workers who are willing to work full-time hard work for low wages. However, you should not expect that such employees will work really well, producing high-quality goods.

How to appeal to a cheap labor force, and other methods of non-price competition can reduce enterprise expenses. This means that by keeping prices equal to competitors in the vast market, the company can count on greater profits. This technique is quite typical for both small and medium-sized businesses.

Conditional-economic: looking in more detail

There are several methods combined in this group to increase the competitiveness of an enterprise. If those described earlier made it possible to influence an opponent, then this group was developed on the idea of ​​attracting more buyers.

The simplest way, which is completely subject to the law on protection of competition, is legal, correct and does not lead to a decrease in the quality of services - this is to expand the range. The company thus forms a line of offers so that the client can find anything for himself, regardless of his wishes, no matter how specific they may be. This applies not only to names, but also to packaging. For example, a classic package of milk is one liter in volume, but to meet the needs of a certain category of customers, containers of 100 ml, 330 ml, half a liter or one and a half are produced.

Selection and pricing policy

As they say in an economics course in any specialized educational program, you can apply knowledge of the concept and types of competition to improve the company’s position in the market. How does this happen within the approach described above? As we were able to identify, the sale of goods that are in stock in different options design, always more than that which exists only in one form.

This type of competition is beneficial for the enterprise, as well as for the client: for small packages you can set prices that, in terms of the net weight of the product, will be higher. The company makes a profit, the client gets the product he needs. Additional tools this type of competition (the concept was given above) - a change design solution. The more modern and brighter a product looks, the more willing they are to buy it. It is worth taking into account fashionable music, popular films - in a word, even aspects of social life that are not directly related.

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. 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 pressing issue in any market for 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 periodical literature, where marketing research in various markets, 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 on 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 in the most diverse different 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 the 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 longer, to keep prices constant in order to purposefully reduce costs and expenses on marketing, to ensure an increase in profits (maximization). In monopolized markets, prices, as economists say, become less elastic.

This does not mean, of course, that “price war” is not used in the modern market [No. 2 p. 145] - 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%).

Often, even in nearby stores, prices for the same goods, although slightly, differ. This is how the struggle for the buyer manifests itself, and this phenomenon is called price competition. In today's saturated market, such rivalry arises both among large network suppliers of goods and services, and between small firms and even those nearby retail stores. Competition keeps prices at a level that is beneficial to the buyer and allows firms to use various methods in the fight for the market, attract new customers, and also increase your profits.

You will learn:

• What is price competition?
• How does it differ from non-price?
• What methods and strategies of price competition are distinguished?
• What does unfair price competition mean? How to resist her.

What is price competition

Price competition is a type of competition in business that involves reducing prices for goods and services. Moreover, this method of market struggle is accompanied by a reduction in the price/quality ratio that is beneficial for the consumer, that is, for goods and services of equal standards, the buyer begins to pay less, or for the same money receives products of higher quality. As a result, depending on the reaction of competitors, two scenarios may occur for the company: a decrease in average profitability or an increase in sales by attracting some consumers. The first scenario entails a decline in the investment attractiveness of the industry. If, as a result of price competition, the company managed to lure some buyers to itself, then profits increase.

The behavior of rivals can be of a different nature. A competitor's resources to reduce the price of a product or service may be limited by the cost of production, and it will not necessarily have enough funds to also reduce the amounts requested for the product in competition. One of the features of competition for buyers is price dumping and the market as a whole - reducing the price of goods and services below cost, as a rule, in the presence of an external source of financing that temporarily covers the company's losses. Since any activity commercial company is aimed primarily at making a profit, then with dumping it plans to recoup losses in the future, or has a strategy that, despite a strong price drop, allows it to get competitive advantages and benefits not available to other market participants.

For a firm, price competition is justified if two conditions are met.

Firstly, if cost to the consumer is a key factor determining his decision when choosing similar offers of goods and services.

Secondly, if the company that started competition, is able to reduce the price of a product or service to such an extent that rivals will not be able to have a positive profit and will begin to operate at a loss. This strategy can be implemented by a company that has achieved maximum cost reduction, becoming a leader in product costs. The minimum level of costs allows the company to reach the cost of goods, which is no longer profitable for competitors and will lead to losses.

Main types of price competition:

1. Direct competition, accompanied by a large-scale price reduction alert.
2. Hidden competition at which it enters the market new product With best quality and properties (compared to competitors' products), while its price is only slightly higher.

Price and non-price competition: what's the difference?

Price competition– the struggle for the buyer and additional profit by reducing production costs and setting final prices at which neither the range of goods nor their quality changes.

Non-price competition- a type of struggle between firms due to technical superiority, increasing the level of services, improving the quality of goods and its reliability, introducing convenient payment methods, and guarantees to customers.

With non-price competition, firms attract customers with more advantageous consumer properties of the product for specific groups of people, improved service and after-sales service, fundamental improvements and changes to the product, large-scale or, conversely, narrowly targeted advertising.

Previously, in economics, price competition was considered a priority for enterprises, but since the second half of the 20th century, they increasingly began to use a type of market struggle that was not associated with reducing the cost of products. This has logical explanation– non-price competition has a number of significant advantages for the company.

Firstly, the reduction in cost is unprofitable for the firms themselves, and the smaller the enterprise, the more difficult it will be to withstand the price competition that has begun. Although it is easier for large companies to compete on price, having a greater margin of safety and financial resources, dumping is also unprofitable for them, since due to its scale the company incurs colossal losses - losses on the sale of one product add up and turn into a huge amount of total damage.

Secondly, in conditions modern economy Consumer demands have become more complex, various product options have appeared on the markets, and often a person is ready to pay good money and even significantly overpay for products with properties that suit him. But if the product does not satisfy the client with quality and some special characteristics, it will not be purchased even at a low cost. Successful product differentiation leads to the fact that competition simply disappears; the product, due to its special properties, occupies a free niche in the market and is sold at a price favorable to the company. At the same time, the company simply has no one to compete with, since its products fully cover the needs of a specific group of consumers. Thus, non-price competition and product differentiation can lead to avoidance of market struggle in principle.

Third, with non-price competition, the costs for the company are significantly lower than with dumping on the market due to a decrease in cost. The costs of a good advertising video can be significantly less than the losses from selling goods at reduced prices, while the return on the video and the advertising campaign as a whole can increase sales volumes and even make the company a market leader. Sometimes even a small change in the properties of a product, if it is initially successful, can make it much more convenient for the buyer and increase its attractiveness while maintaining the cost and even increasing it.

Undoubtedly, fighting with methods not associated with cost reduction requires significant costs: modernizing equipment, searching and implementing new ideas, improving the quality of goods, large-scale advertising campaigns - all this requires a lot of money, but the return can be significantly higher, and with a price competition, a company almost always faces losses that will have to be recouped in the future.

Price competition methods

Monopoly high price- a type of amount requested for goods and services at which a monopolist firm occupies a dominant position in the market. At the same time, the company sells products and provides services at a significantly inflated cost, resulting in excess profits. This price is established as a result of the monopolists releasing an overwhelming amount of economic goods.

Monopoly high cost leads to a drop in solvency: the higher the price of a product, the fewer people want to purchase it. Undoubtedly, every seller is interested in establishing the maximum cost of his goods, but in the conditions of modern tough market competition it is almost impossible to maintain high prices for a long time. The higher the price competition in the market between sellers of the same product, the lower the amount they ask for it, and vice versa, as competition decreases, the cost of the product increases.

Exclusively low prices. Such prices are set by the largest companies when purchasing goods and services from medium and small firms, during contracts for the supply of raw materials from developing countries, and when purchasing from enterprises operating in the public sector of the economy. Large companies, through market mechanisms, force small and medium-sized organizations to sell their products, components and services at a reduced cost; in this case, the large buyer himself dictates his price to the sellers.

Dumping prices. These prices are formed in order to capture the entire market or part of it, ruining less stable competitors. At the same time, the company practicing dumping also incurs losses, but then, when it occupies a significant part of the market, these losses are compensated and the company increases profits.

Discriminatory prices. These prices are determined depending on the buyer. One product can be sold to consumers at different prices, although there will be no differences in quality. The only difference is the approach to sales and customer service. Price discrimination has several types.

1. Price discrimination of the first degree, with it, each consumer receives the price at which he is ready to purchase a product or service: if the buyer agrees and can pay more, the highest price is set for him, but if the client’s solvency is low, then he will be asked for less money for the same product. Both consumers will buy a product of the same quality, but will pay different amounts.
2. Price discrimination second degree, in which the volume of purchased goods and services plays a role: if it is high, the company can reduce the price of one unit of production, but not large quantities the price of the product is set higher.
3. Third degree price discrimination. This discrimination takes into account the elasticity of demand and market segmentation. At the same time, the monopolist identifies areas of the market with different elasticity of demand, as if dividing it into sectors. If the buyer's demand is inelastic, he will be offered the highest price. Otherwise, the monopolist will set the price lower.

Table. Comparative characteristics of competition methods

4 price competition strategies

1. “Skimming” strategy. When introducing a new product to the market, the company inflates the price in advance in order to quickly recoup the costs of development and launch, as well as resources spent on marketing and promotion of the product.
2. Easy penetration strategy. When introducing a new product to the market, the price is lowered to make entry easier and to attract the attention of buyers more easily and quickly.
3. Strategy for price differentiation by market segments. In different parts of the market, the company sells products at different prices, taking into account the environment in which the product is sold and the geography of its sales. The cost of the same products on different continents and in different countries may differ many times.
4. Strategy to follow the leader. An enterprise introduces a new product to the market, but sets the price for it like a competitor, giving it the right to test the market’s readiness for such a price. In this case, the quality of the product may differ in favor of the “catch-up” one, but the cost remains the same, then the phenomenon arises hidden price competition.

To successfully fight, it is necessary to have a good knowledge of the potential of rivals, their ability to respond to changes in prices and mechanisms for selling a product or service, as well as their competitive advantages and vulnerabilities.

The practitioner tells

About the costs of price competition

Boris Vorontsov,

director of the company "Informat", Nizhny Novgorod

In modern competition, relying only on price factors is extremely dangerous. If a company does not have ample opportunities and sufficient funds to modernize production, improve product quality, and does not engage in optimization, then sooner or later it will be defeated in price competition, and the rival, having captured new markets and received more buyers, will be able to attract third-party funds and expand production .

Loss of profit due to a decrease in cost can be compensated by an increase in sales volumes, but such a mechanism will not always operate; it all depends on many factors. Price reductions can be used for tactical wins, such as clearing inventory or undermining direct competitors.

Examples of price competition + thoughtless mistakes

Situation 1. A competitor reduces prices on key product items.

Typical reaction. We find the same products in our country and make a discount on them, perhaps even greater than that of competitors.

Where is the mistake. The company perceived the competitor's actions as an aggression against itself, although in fact its measures were aimed at the consumer and stimulating him to purchase the product.

Recommendation. It is necessary to develop other special offers for other product groups. For example, your competitors have cheaper champagne, but you set discounts on candy, or your opponent has a discount on vacuum cleaners, and let you have a discount on cameras. This method will allow you to retain at least some of the buyers.

Experience. A quick price reduction following competitors' lead does not end well; in the end, everyone suffers: some firms go bankrupt, others are forced to spend their own and third-party assets in order to stay afloat. On the other hand, a store can offer discounts during a certain time range, for example on Saturday from 12 to 13 pm, so it will attract customers during this period, and outlets competitors will be empty.

Situation 2. A competitor sells a product at a price lower than the cost of your product.

Typical reaction. We reduce the price to the level of competitors, which leads to our losses. We are trying to quickly negotiate with our suppliers to reduce prices.

Where is the mistake. A competing company that launched a large-scale campaign prepared it for a long time, assessed all the risks and thought through every step, reduced costs and optimized processes. In pursuit of competitors, we are forced to do everything hastily, which is expensive and not always effective.

Recommendation. Don’t rush, calmly think through your advertising moves, make discounts by tying the dates to some calendar events, holidays, weekends, set a discount a little more than your competitors, start your events in last days promotions of a competitor company or immediately after the end of its advertising period.

Experience. Shop household chemicals launched a monthly promotion “For everything minus 30%”. The company initially lost a significant number of customers who went to another seller for a good price, and profits fell. But then the company developed a long-term promotion consisting of several stages. In the first week she sold washing powders at a 40% discount, in the second week there was a promotion on shaving products and men's products. The third week was marked by a discount on gifts for International Women's Day - the company held a sale on cosmetics; in the fourth week, it announced a promotion during which it provided a discount from 10 to 12 am, at the most unprofitable time. As a result of the implementation of this large-scale campaign, its thoughtfulness and multi-stage nature, the company not only regained customers, but also increased profits several times.

Situation 3. A competitor (chain store) periodically reduces prices.

Typical reaction. We react immediately and reduce the cost following the competitor, giving buyers comparable discounts.

Where is the mistake. A major player in the market has a greater margin of safety; after you, he will lower prices even lower, since he can afford it by increasing the turnover of goods and preparing in advance for such a development of the situation.

Recommendation. Don’t chase your competitors and look at its promotions, develop your own, attract customers with certain groups of products that your competitors don’t have, improve service and quality of service, conduct your own unique advertising campaigns and sales.

Experience. A company producing household chemicals was faced with a competitor that produced shampoos in the same packaging and with a similar design. The company moved away from direct price competition by changing the packaging design and investing a large amount money for the promotion and promotion of a new brand. Moreover, an active and well-thought-out advertising campaign made it possible to begin selling products in a higher price segment of the market, which, while maintaining production costs at the same level, led to a several-fold increase in profits.

Another example. Company for a long time was engaged in design, sewing and selling curtains through a stationary store. But a major chain rival appeared in the city, luring away customers with low prices. In competition it was developed new strategy market behavior. The company began to offer the services of a visiting designer, who, already on site using the catalog, was able to show and tell which option of curtains was suitable for the customer, and this service was free for the client. As a result, the company not only regained the lost part of the market, but also increased profits, as designers began to develop and offer on site not only the design of curtains, but also the interior of premises in general.

Expert opinion

Price splitting is the path to victory in a price war

Katerina Ukolova,

CEO, Oy-li

With dumping on the market technically complex devices we encountered in 2008, when a competitor lowered prices, we had a great desire to do the same, but we chose a different strategy. We did not reduce the cost; instead, we gathered representatives of all our dealers in one place, discussed the strategy, developed an action plan, compared the competitor’s prices with ours and gave everyone the opportunity to express their vision of the situation.

As a result, we came to a price breakdown strategy, separating from the total amount the price of the product, the cost of delivery, installation of equipment and subsequent post-warranty service. Instructions have also been developed to allow our sales managers to bypass inconvenient questions from customers about whether a competitor has a lower price.

Market monitoring showed that the competitor’s prices differ slightly, sometimes even more, due to different exchange rates of the currency for which the equipment was purchased. We began to pay more attention to service and increased our customer focus; our managers accompanied each buyer from the very beginning of the transaction to the final result. This long-term strategy allowed our company to earn the trust of consumers and additionally increased sales by 40%.

Unfair price competition

Based on psychological impact against the buyer, unfair competition is aimed at disorienting the consumer, as a result of which he makes erroneous actions.

• Contrast and opportunity cost method.

This method involves a psychologically difficult moment for the buyer, when he, using the concepts of “expensive” and “cheap,” cannot navigate and does not realize the real price of the product.

This technique has a number of limitations, the main one of which is that in the market for a product or service there must be a certain circle of sellers or one, but creating pseudo-competitors. A kind of presentation is arranged for the buyer, the essence of which boils down to convincing him that the price of the product is real and objective, even despite the fact that it may be inflated several times.

To do this, a seller interested in selling a certain product at an increased price creates pseudo-competitors whose cost of this product is several times higher than his (although his price is higher than the market price). As a result, the buyer, having gone through, for example, five fake stores, comes to the “main seller” and, seeing his product at a price lower than that of his supposed competitors, buys it with complete satisfaction, without even suspecting that he overpaid for it many times more its real value. But in other places it’s even higher! At the same time, the buyer does not consider himself deceived, because he compared prices for the same product and bought at the most favorable price.

• The simpleton's method.

This method allows the seller to sell goods or services due to the fact that the buyer has the erroneous opinion that the seller is a narrow-minded person and is selling on the market at a reduced price. Feeling his superiority over the seller, the buyer makes the transaction without hesitation and remains satisfied with the purchase, as well as with himself and his imaginary knowledge.

For example, in one European capital, a seller specifically wrote price tags with grammatical errors and displayed them in the main showcases. When his errors were pointed out to him, he replied that he knew about them, but this method in the eyes of the buyer makes him look like a simpleton and a hillbilly, which gives him an advantage over his competitors and allows him to make a profit half as high as theirs.

• Dumping method.

One of the most common methods of unfair competition is dumping. It is usually associated with attempts by foreign manufacturers to capture some new markets by supplying goods and services at lower prices. Dumping is widely used both in foreign and domestic markets.

The meaning of this phenomenon is that the company always bears production costs. The company's profit is formed according to a simple formula:

Profit = price – costs

As we can see from the formula, there are two options for increasing profits - either reducing costs or raising prices. But it is sometimes very difficult to reduce production costs, or they are already brought to a minimum limit, and increasing prices is impossible due to competition in the sales market.

Under these conditions, many firms began to search for methods of competition. One of them turned out to be one in which the company sells goods or services cheaper than their cost and production costs. But what is the point of such a strategy, since the method is paradoxical: selling a product below the cost of its production means not only losing profit, but also the overall profitability of the business? Everything turns out to be simple: if a company has a reserve of finances that it is ready to spend on fighting competitors, even at a loss, then it receives handy tool price competition – dumping.

Let's consider the situation at simple example trade in licensed CDs. There are three sellers of these products in the city, all of them have approximately equal prices and a constant flow of customers; the business provides a stable profit to all these companies. And now a large store opens in the city with similar products, but at prices much lower than those of the old sellers. A few months later, having not found a way out of the current situation, small companies close their business, and a large store raises prices on CDs so that the costs of dumping and selling CDs below cost are recouped, and they also make a profit due to the fact that they became monopolist in the city, occupying the entire market and winning the competition.

After the seller who has begun price competition remains alone in the market, he monopolistically raises prices, recoups the costs of the dumping campaign and can single-handedly set the price certain type goods, extracting excess profits from this situation.

But successful dumping always requires a margin of financial strength - if a company incorrectly calculates its strength, it risks being left with large losses. In addition, a situation may occur in the market with a conspiracy of competitors, as a result of which they will unite in order to resist the company that has begun the dumping fight. In any case, the buyer benefits from dumping, since the cost of the product decreases, but in the future the same product can increase in price multiple times. So, for example, to enter the American market, one well-known Japanese company sold equipment below cost, for the same thing the Japanese in the manufacturing country paid $400, and in the American market at that moment the price for a similar product was half as low - $200 . American buyers benefited from this situation, and the Japanese company managed to conquer part of the American market and successfully gain a foothold in it.

Sometimes monopolists use dumping as a barrier to entry into the market. Dumping, combined with monopolistically high prices, is an effective tool for regulating markets. So, we can consider the situation with oil in the second half of the 20th century. The union of oil exporting countries OPEC raised oil prices several times in the early 1970s. This gave impetus to the development alternative methods and technologies for the extraction of black gold, oil development has become profitable even where it was previously not economically feasible. Small and medium-sized companies began to create new technologies and invest finance and resources in this previously unprofitable niche. At the same time, the price of oil only grew, firms continued to develop alternative technologies. When, decades later, the development of new methods and deposits began to bear fruit, OPEC sharply reduced prices. As a result, the companies that invested in this business found themselves bankrupt and suffered colossal losses. The cartel, having eliminated competitors, gradually increased prices and compensated for losses incurred as a result of competition. The cartel not only carried out a long-term campaign to prevent rivals from entering the oil market, but also, remaining a monopolist, created a convenient mechanism for regulating oil prices, which it used once again to ruin companies that had invested in the development of shale oil.

How to resist price competition: step-by-step instructions

Step 1. Raise prices.

Paradoxically, an increase in price does not result in a drop in profits: the table below shows that with a decrease in price, the number of orders increased, and income also increased, but profits fell.

When the price increased, the number of orders decreased, and income decreased, but overall profits increased.

Step 2. We introduce an additional service.

Let's consider an example with several stores selling computer components. Most of them have their own website with catalogs and the possibility of remote ordering. You start browsing through them to find the best deal. Prices in all stores are approximately equal, but in one they offer goods that are not only in stock, but also the ability to order necessary item from the supplier's catalog. Moreover, this store provides free delivery of purchases to your apartment, installation and connection if necessary, as well as configuration and resolution of any problems with compatibility of components. As a result, after studying the offers from all stores, you will most likely settle on the one that offers such a convenient service for the client, and even does not charge money for it. In this case, good service and convenience for the buyer will play a key role in the choice, and for the store they will ensure stable customer interest and leadership in the competition.

Step 3. We complete sets of goods.

For the buyer, product sets are convenient for specific purposes. If they are compiled competently and logically, then the buyer with a high degree of probability will not look at the price of such kits, choosing their practicality.

Let's look at the sets using simple examples.

Cloth:

• jeans and a belt that matches them in color and texture;
• shirt and tie, possibly cufflinks;
• sets of work clothing, selected for specific working conditions.

Technique:

• photographer's kit: camera, lenses, flash, batteries, lens cleaning products;
• fisherman's set: fishing rods, fishing line, hooks, lures, camping furniture, tents for winter fishing.

Sets allow the seller to generally increase average bill, and with it profits also grow. But it is necessary to compose the kits so that they are truly useful and logical.

Step 4.We offer several prices for one product, giving the buyer a choice.

This practice is mainly widespread abroad, but in our country it is also beginning to be actively introduced into the sphere of trade and services.

Let's return to our example with an online store selling computer components.

On the website we can see two prices:

1. Low price for goods, minimum. But the store sets this amount without shipping costs; you will need to pick up the purchase yourself in the store. In addition, this price is valid for goods only upon pre-order, and the waiting time can be more than seven days.
2. The price for the same product is higher but the store will deliver it to the apartment itself, and the item is available in stock.

In this example, it is clearly seen that the buyer is given the right to choose the price himself; he can wait and receive his goods at the lowest cost in a week, while experiencing certain inconveniences associated with the need to personally appear at the point of delivery. If the buyer chooses a higher price, he receives free delivery and generally more convenient ordering conditions. The choice is up to the consumer.

Step 5. We increase loyalty, finally leaving the price battle.

Increasing customer loyalty to the store is a long and painstaking work that must be carried out constantly, it consists of the following actions:

1. The buyer should know that behind your store there is a serious, sustainable business, a well-oiled mechanism.
2. Don't put money before the consumer's convenience: if the customer feels that your business is aimed at solving their problems, they will easily shop at your store, and you will make a good profit.
3. A store is not only a display case with goods, it is a well-coordinated mechanism whose work is aimed at satisfying the needs of the buyer.
4. Do not abandon the consumer after one or two purchases, try to make sure that the person who once bought a product or ordered a service from you comes to you again, and in the future becomes a regular customer. Develop customer loyalty programs, give discounts when the total amount of purchases reaches a certain level, hold promotions and give pleasant gifts to regular customers. Remember: the more purchases your client makes, the more valuable he is to you.
5. Deliver a little more than you promised to the client, please him with pleasant surprises and lucrative offers.

The practitioner tells

How to convince someone to buy more

Vasily Baida,

General Director of INSKOM Solutions, Moscow

We are constantly faced with the desire of customers to reduce prices and optimize their costs, while large buyers, due to the large volume of orders, are trying to impose a minimum price on us. Since we work with large Western chains, our main argument in countering attempts to impose their own low price on us is our service: we have focused on the quality of supplies, their uninterrupted supply, and fulfilling orders on time. This allows us to argue reasonably against consumers understating our prices and sell goods on terms favorable to us, while the client agrees and is willing to pay more for our convenient and high-quality service and the guarantee that delivery deadlines will be strictly observed and his risks of losses due to problems suppliers are minimal or reduced to zero.

Method 1. Operate with facts, show potential clients the history of your work with customers and the positive results they achieved through working with you. Show your clients statistics: recommendations from partners and customers based on the results of your cooperation with them will be an excellent argument in your favor. It is better if these are specific numbers and graphs.

Method 2. Help customers. Try to identify weaknesses in the customer’s business processes and clearly point this out to him. Analyze how the leaders of the field in which your customer operates operate, make a comparison and recommend to your new clients any changes that can improve their business, optimize costs, and bring profit. Remember, the successful activity of the customer is the key to the stability of your business and your profit.

Method 3. Maintain personal contacts, build relationships with customers on trust and guarantees - people buy not from companies, but, above all, from other people. If the client knows that your business is stable and you have serious results, then he is more likely to order from you than to look for the same product at a lower price. Successful business

is built on trust. Demonstrate loyalty to your regular customers, and show new ones, using the example of already established relationships, what you are ready to achieve in cooperation with them. The customer must trust you personally. Method 4.– sometimes it is easier to sell a product to a new consumer at a higher price than to sell the product to old customers at the same cost. Maintain a flexible pricing policy depending on who you work with. Rely on your employees, encourage them to find and attract new customers. For example, offer your staff a certain percentage of orders from customers they find. In particular, pay a bonus of 5% on the orders of a new customer who is referred to you by an employee.

Information about the experts

Katerina Ukolova, CEO, Oy-li. Oy-li provides services in the field of sales development, selection and training of commercial service specialists, website promotion and development of advertising materials. On the market since 2011. Official website - www.oy-li.ru.

Vasily Baida, General Director, INSCOM Solutions, Moscow. Graduated from Moscow State University Economics, Statistics and Informatics (MESI). At L’Oreal, he led the direction of work with the Luxe and Drug networks. Since 2010 - General Director of INSCOM Solutions (INSCOM LLC). He is interested in rowing, boxing, and motorcycles.

Boris Vorontsov, Director of "Informant", Nizhny Novgorod. "Informant" is a competitive intelligence agency that specializes in the collection and analysis of business information. The main goal is to assist clients in increasing the competitiveness of their business. Provides services on the territory of the Russian Federation and in countries near and far abroad.

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, a new product with significantly improved consumer properties is introduced to the market, but 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. During the 80-90s, the leading place in the list of non-price factors was taken by reduced energy consumption and low metal consumption, complete absence or low environmental pollution, crediting of returned goods as a down payment for a new one, advertising, high level of 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.

From this article you will learn:

• What are the differences between price and non-price competition?
• What are the advantages and disadvantages of using non-price competition?
• In what forms can non-price competition take place?
• What methods of non-price competition are used in modern market economy

From an early age, each of us finds ourselves in harsh circumstances of competition in various areas of life. Competition in the economy can definitely be called one of the toughest types of struggle. Both wealth and luck are at stake here. In entrepreneurship, there are two types of competition – price and non-price. More often than not, low cost actually wins. And yet, non-price product competition helps achieve greater success.

What is non-price competition

Competition is the struggle of individuals in various areas of the life process. First of all, it means economic sphere. Figuratively speaking, competitors are the owners of nearby shops who are trying to get as many visitors as possible. But it's not just the number of buyers that matters. It is also important to sell your goods and services on the most profitable terms. Scientists believe that it is competition that spurs the modern world to develop at such a rapid speed. And at the same time, it is the basis of the instability of the world economy.

Exist two ways of economic rivalry: price and non-price. The difference between price and non-price methods competition is quite serious:

1. Price competition- This is a type of fight against rivals by reducing the cost of goods. Most often, this method is used where demand is greater than supply. Another option is when customer competition is strong enough. This option is also used when there are prerequisites for pure competition (many manufacturers offer the same type of product). This way of competing with competitors cannot be called the most effective. After all, competitors can suddenly set prices at the same level, or even lower. In this case, both the subject himself and his competitors lose their earnings. Despite all the shortcomings, this option is nevertheless widely used, especially in cases where it is necessary to introduce products to a new market. Such measures should be taken very carefully. You need to know for sure that a decrease in cost will actually result in an increase in profits, and not losses.
2. Non-price competition involves more progressive and modern techniques. Among them are the differentiation of their products from similar products from competitors, the introduction of special characteristics, expanding the range, improving quality, increasing advertising costs and warranty service. The use of non-price competition methods generates conditional monetary stability. Essential positive thing also is that competitors often fail to retaliate immediately, giving the rival an advantage. If innovations turn out to be successful, all expenses for non-price competition options not only pay off, but also serve as a source of income.

What are the disadvantages and advantages of non-price competition?

Key Benefits non-price competition are as follows:

• Price fights have a negative impact on all market participants. Bonuses go only to the buyer. Price competition can lead to monopoly and economic decline. The more powerful the company, the longer the period of time it can sell goods at a reduced cost. Medium and small companies will lose out in competition with leading brands.
• Competent differentiation is a more productive way of competition than dumping. Behind the right product the customer will pay the price set by the company.
• If done correctly, non-price competition is less costly than price competition. A good advertising clip can be made for little money, the main thing is to find a creative and tempting idea. The same applies to product properties: even a minimal improvement in design can attract the attention of buyers.
• In non-price competition, the firm has huge field for activity: you can gain superiority with the help of any successful find.

At the same time, there is also a number of disadvantages non-price competition:

• The company is losing that group of buyers for whom cost comes first.
• Dependence on the professionalism of managers and ordinary workers, because they must develop competent competition tactics and systematically monitor the compliance of the real state of affairs with plans.
• Many firms use illegal methods of non-price competition (poaching personnel, manufacturing counterfeit products, industrial espionage).
• We need cash injections, often permanent.
• Large expenses for trade marketing, advertising and PR.
• Specificity in positioning, thoughtfulness of actions, and correct tactical moves are required.

What types of non-price competition can be used and which ones should not be used?

There are different types of non-price competition:

• legal;
• semi-legal;
• deterring competitors using government regulation and support.

Legal methods of competition suggest:

• product rivalry. In the course of working on the existing assortment, a new product appears that has a new price;
• competition to provide services. It is especially relevant for the machinery and equipment market. The service package includes the supply of promotional materials, the transfer of technical papers (which simplify the use of products), training of employees of the client company, maintenance during the warranty period (and after it).

Semi-legal forms competitive rivalry means:

• economic espionage;
• bribes officials in the government apparatus and in rival companies;
• conducting illegal transactions;
• activities to restrict competition. Here the company has at hand an extensive arsenal of methods, the use of which can lead to the dictates of a monopolist company in the market. These include, for example, activities to impose intra-brand standards, promoting convenient conditions for selling rights to trademarks or patents.

The most common forms of non-price competition

The most common forms and methods of non-price competition are:

1. Product differentiation

The purpose of product differentiation is to offer the buyer products various types, styles, brands. This, of course, gives the buyer serious bonuses, expanding the possibilities of choice. However, pessimists caution that product differentiation is not an absolute good. The rapid growth in the number of product items often leads to the buyer being unable to make an informed choice, and the purchasing process takes a lot of time.




Product differentiation is a kind of reward for those negative phenomena that are characteristic of monopolistic competition.

Types of differentiation:

• Product differentiation– production of goods of higher quality and attractive appearance than those of competitors. Regarding standardized products (petroleum products, metal), there is almost no possibility of product differentiation. In relation to fairly differentiated goods (electronics, motor vehicles), such tactics are a matter of course.
• Service differentiation– is to provide a higher class service compared to competitors. This may include installation and after-sales service, speed and safety of deliveries, training and consultations for customers.
• Personnel differentiation– the desire to ensure that the company’s employees do their job more productively than the employees of a competing company. Team members must have qualities such as friendliness, professionalism, and commitment.
• Image differentiation consists of working on the appearance, style of the company and (or) its products in order to highlight them best sides compared to competitors and/or their offerings.

2. Improvement of manufactured products and offered services

Another method of non-price competition is for competitors to improve the goods and services they offer. Improving the quality characteristics or user parameters of products leads to increased sales. Competitors who don't care about improving their product step aside. This path of competition leads to favorable consequences, the main one of which is customer satisfaction. In addition, other firms also begin to take steps to offset the temporary success of their rivals, and this contributes to scientific and technological progress.

Competing companies are looking for funds to improve their product or create a new position. All these measures make it possible to strengthen production and increase profits.

Some companies, instead of conducting fair competition, engage in imitation (imitative) activities. Most often, they stop at minor modernization of the product. We are talking about an external effect. Such companies pass off apparent changes in the product as real, and also introduce obsolescence into the improved product. This approach can lead to massive customer disappointment.

3. Advertising

According to foreign researchers, goods go from manufacturer to buyer along a path that can be illustrated by the formula:

product + distribution + scientific activity + resellers + transport + advertising = sale

• provides the client with information about products;
• increases demand for products and forces them to increase the pace of their production. There are often cases when a manufacturer, having a small income, through advertising in non-price competition increases the level of sales several times, which leads to receiving a large income;
• increases competition;
• enables the media to be independent, bringing them a certain profit.

Advertising reduces sales costs. Firstly, advertising promotes faster turnover of goods. Secondly, it ensures that goods are different from similar ones. This allows buyers to track the cost of products in different stores and thereby restrain the arbitrariness of sellers in setting markups. Products that are smartly advertised will pass through distribution channels with minimal markup.

4. Other methods of non-price competition

The group of non-price methods includes: providing a wide range of services (including employee training), free service, handing over a used product as an entry fee for a new one, supplying equipment on the terms of “finished products in hand.” Reduced metal consumption, absence negative influence on environment, reduced energy consumption and other similar parameters have today become the main ones in the list of advantages of goods or services.

Currently, many companies are conducting marketing research. They make it possible to find out the buyer’s desires and his opinion about various products. Possession of such information helps the manufacturer to design the market situation and reduce the likelihood of mistakes.

Methods of non-price competition: 3 main groups

Methods of non-price competition are divided into several groups.

First group– these are techniques aimed at achieving competitive advantage by improving various product parameters.

These include:

• launch of new product items;
• introduction of products that have new consumer characteristics, for example, higher quality, improved appearance, more attractive packaging ( this process called differentiation consumer properties goods).

Such techniques are used in cases where:

• the company wants to improve the consumer characteristics of its products;
• the company wants to increase the market segment of its products;
• the company wants to become known through a wide range of manufactured products in a limited market sector;
• the company is working on the timely introduction of new service conditions (sales and after-sales) in order to interest new groups of customers, force them to purchase products more often and pay at a time for a larger number of items (most often with the help of large discounts and promotions).

Second group- these are methods of stimulating the buyer to buy. Most often these are short-term promotions, sales, etc. Incentive goals in this case, there is an increase in the number of clients or an increase in the number of goods purchased by the same client.

Sales promotion tools for consumers are:

• sweepstakes and lotteries, discounts, coupons, promotions;
• trial samples (samples, testers, as well as tasting);
• competitions and games;
• sales;
• various “label events”;
• consumer clubs.

A sales agent is a link between the manufacturer and the buyer. It is necessary to stimulate the sales agent in order to create a bright image of the product, make it easily recognizable and widely known, and increase the number of positions in trading network. It is equally important to “stir up” the agent’s own interest in large sales volumes of a particular brand.

Sales promotion means For sales agents there are various bonuses and gifts, all kinds of compensation for advertising expenses, exhibitions and sales, prizes, trade booklets, souvenirs, etc.

For the company to be successful, it is necessary to constantly look for alternative ways to sell products, as well as index the amount of discounts in accordance with the current situation on the market.

However, non-price competition works primarily through improving the quality characteristics of goods and production technology, modernization, patenting and branding, as well as competent “servicing” of sales. This type of competition is based on the desire to get a piece of industry market(or a significant segment of it) by producing new products or improving existing products.