Price and Non-price Competition

1. Price and Non-price Competition

2. Price Competition • The main aim of businesses is to maximise profit. • Firms may try to increase sales by cutting price – price competition

3. Price competition involves: • Discounts

4. Price competition • Buy one, get one free

5. Price Competition • Sale prices

6. Price Competition • Interest free terms

7. Price Competition • Loss leaders (below cost prices on one item to get you into a shop where you will hopefully buy more – supermarkets use it)

8. Businesses often prefer to compete through non-price competition

9. Non-price Competition Product Differentiation Product Variation Location Sponsorship Modification of the product Packaging Vertical product variation Service Advertising Branding

10. Product Differentiation • Making the good or service APPEAR different or superior to the competition.

11. Location • Choosing a better location than it’s competitors (convenience, classy, close to other shops, good parking). • Businesses of similar goods locate close together as it becomes acceptable for consumers to buy a certain product in that particular area (e.g. second hand car dealers, restaurants, takeaways, etc)

12. Packaging: • Firms compete by making their packaging more attractive (stand out). • Includes logo’s and trademarks that helps to identify a product (e.g. horse-National Bank) • Advertising: • Media e.g. TV, radio, print media (magazines, newspapers, posters etc) • Usually used for non-price competition by attracting attention to the business by other means • Sense of fair play • Discredit the opposition (Whitakers) • Sex appeal • Fun

13. Branding: • Producers can create a brand name to differentiate from another product e.g. Coke for cola, BP for fuel. • Brand loyalty can be encouraged through competitions and promotions (fuel stations) • Service: • Extra or better services could be offered. • Petrol station- check oil & water, wash windscreen • Fast food outlets-claim the fastest service available

14. Sponsorship: • Some firms sponsor events (sporting, cultural) to be identified with something worthwhile, at the same time as getting media exposure for their brand name. • Rebel Sport Super 14 • Heineken Open (tennis)

15. Product Variation • Real variations are made to the product so it actually is different. • Product modification: • Producers attempt to bring in new variations, i.e. new features (cars- cruise control)

16. Vertical product variation • This is aimed at creating a range of their products in order to appeal to a wider range of consumers. • E.g. subaru (car manufacturer): • Impreza (sedan and wagon) • WRX (sedan and wagon) • Legacy (sedan and wagon) • Outback (wagon) • Forrester (wagon)

17. Advantages and disadvantages of Non-Price competition

18. Advantages and disadvantages of Non-Price competition