Why non price competition

If persuasive advertising leads to an outward shift in demand, consumers are willing to pay more for each unit consumed. This increases the consumer surplus that a business might extract. High spending on marketing is important for new business start-ups and for firms trying to break into an existing market where there is consumer or brand loyalty to the existing products in.

Traditionally, the main measures of competitiveness are in financial or marketing terms. For example, a competitive business might be expected to achieve one or more of the following:. Company Reg no: VAT reg no Main menu.

Subjects Shop Courses Live Jobs board. View shopping cart. View mytutor2u. Account Shopping cart Logout. Explore Economics Economics Search. Explore Blog Reference library Collections Shop. After defining this competition, knowing their prices would allow the artisan to put this pricing strategy into effect.

Banks shop with competitive banks every day to check their prices. Pricing above competitors can be rewarding to organizations, provided that the objectives of the policy are clearly understood. The marketing mix must also be used to develop a strategy that enables management to implement the policy successfully. Pricing above competition generally requires a clear advantage on some nonprice element of the marketing mix.

In some cases, it is possible due to a high price-quality association on the part of potential buyers. Consumer Reports and other similar publications make objective product comparisons much simpler for the consumer.

There are also hundreds of dot. The key is to prove to customers that your product justifies a premium price. While some firms are positioned to price above competition, others wish to carve out a market niche by pricing below competitors.

The goal of such a policy is to realize a large sales volume through a lower price. By controlling costs and reducing services, these firms are able to earn an acceptable profit, even though profit per unit is usually less.

Costs can be reduced by increased efficiency, economies of scale, or by reducing or eliminating such things as credit, delivery, and advertising. For example, if a firm could replace its sales force in the field with telemarketing or online access, this function might be performed at a lower cost. Such reductions often involve some loss in effectiveness, so the tradeoff must be considered carefully.

Historically, one of the worst outcomes that can result from pricing lower than a competitor is a price war. Price wars usually occur when a business believes that price-cutting produces increased market share, but does not have a true cost advantage. Price wars are often caused by companies misreading or misunderstanding competitors. Typically, price wars are overreactions to threats that either are not there at all or are not as big as they seem. In keeping with this idea, can you imagine Swatch selling a 3, dollar watch?

How can companies cope with the pressure created by reduced prices? Search for: 'non-price competition' in Oxford Reference ». All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single entry from a reference work in OR for personal use for details see Privacy Policy and Legal Notice.

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