The essence of price competition
Posted: Tue Jan 28, 2025 3:59 am
Market participants use various methods in the fight for consumers. Price competition is one of the most common methods; its essence lies in setting lower prices for goods compared to offers from other sellers.
If other market players do not adjust their pricing policy in this regard, the company's sales will increase. If competitors reduce prices in response, the average profitability will decrease and, as a result, the investment attractiveness of the industry.
Each seller has its own price reduction limits, related to its costs of producing a unit of output. Only those companies that have sources of additional external financing can afford to set a price for a long period that does not cover costs, i.e. dumping.
However, the purpose of any kuwait email list commercial enterprise is to make a profit, so dumping, in which the company deliberately suffers losses, is either used to create conditions for increasing profits in the future, or brings some benefits that are not available to other market participants, already at this stage.
Read also!
"USP examples to help you come up with your own that's even better"
Read more
Reducing prices to fight competitors is justified in two cases. The first is when price is the decisive factor in the consumer's choice between your product and the offer of other market participants. The second is when the company has a significant advantage in the form of unique or the most modern production technologies, allowing it to significantly reduce costs compared to competitors.
Price increases are another tool of price competition. An example is the fight between two fast food giants - McDonald's and Burger King. In the 60s, McDonald's began selling a hamburger for 15 cents. In response, Burger King came up with a "Whopper" for 37 cents, while emphasizing the higher quality of the product than its competitor.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
In the context of sanctions and crisis, knowing the ROI of your advertising decides whether your business will be successful. Tracking these 5 critical indicators is the key to your prosperity.
What you get for free:
5 Key Metrics to Increase Profits by 220%
The Secret ROI Formula: Instant Advertising Efficiency Calculator
Anti-crisis Solutions Matrix: Find the Perfect Strategy for Your Business in 15 Minutes
We have prepared all the documents and templates with formulas for you. And yes, it is FREE:
Download documents for free
Already downloaded
153398
The difference between price and non-price competition
There are other methods to fight for the buyer besides price reduction. To attract consumers, companies work on improving the properties of the product, adapting it to the needs of a certain segment of the target audience, creating a fundamentally new version of the product or service, conducting advertising campaigns and marketing actions. Non-price competition is based on product differentiation, distinguishing it from a number of analogues.
If until the mid-20th century the predominant method of fighting for the sales market was offering goods and services at a lower price than other players, today non-price competition methods are taking the lead. This trend is explained by the greater effectiveness of this method of fighting for consumers and the variety of tools that companies use.
If other market players do not adjust their pricing policy in this regard, the company's sales will increase. If competitors reduce prices in response, the average profitability will decrease and, as a result, the investment attractiveness of the industry.
Each seller has its own price reduction limits, related to its costs of producing a unit of output. Only those companies that have sources of additional external financing can afford to set a price for a long period that does not cover costs, i.e. dumping.
However, the purpose of any kuwait email list commercial enterprise is to make a profit, so dumping, in which the company deliberately suffers losses, is either used to create conditions for increasing profits in the future, or brings some benefits that are not available to other market participants, already at this stage.
Read also!
"USP examples to help you come up with your own that's even better"
Read more
Reducing prices to fight competitors is justified in two cases. The first is when price is the decisive factor in the consumer's choice between your product and the offer of other market participants. The second is when the company has a significant advantage in the form of unique or the most modern production technologies, allowing it to significantly reduce costs compared to competitors.
Price increases are another tool of price competition. An example is the fight between two fast food giants - McDonald's and Burger King. In the 60s, McDonald's began selling a hamburger for 15 cents. In response, Burger King came up with a "Whopper" for 37 cents, while emphasizing the higher quality of the product than its competitor.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
In the context of sanctions and crisis, knowing the ROI of your advertising decides whether your business will be successful. Tracking these 5 critical indicators is the key to your prosperity.
What you get for free:
5 Key Metrics to Increase Profits by 220%
The Secret ROI Formula: Instant Advertising Efficiency Calculator
Anti-crisis Solutions Matrix: Find the Perfect Strategy for Your Business in 15 Minutes
We have prepared all the documents and templates with formulas for you. And yes, it is FREE:
Download documents for free
Already downloaded
153398
The difference between price and non-price competition
There are other methods to fight for the buyer besides price reduction. To attract consumers, companies work on improving the properties of the product, adapting it to the needs of a certain segment of the target audience, creating a fundamentally new version of the product or service, conducting advertising campaigns and marketing actions. Non-price competition is based on product differentiation, distinguishing it from a number of analogues.
If until the mid-20th century the predominant method of fighting for the sales market was offering goods and services at a lower price than other players, today non-price competition methods are taking the lead. This trend is explained by the greater effectiveness of this method of fighting for consumers and the variety of tools that companies use.