The best companies can do to have control over these psychological factors is to do a great job of branding. And to get the branding right, companies have to know how to develop the right underlying corporate image and positioning strategies. In short, creating a brand image of the product that is impossible, or extremely difficult, to copy is the key to having control over your pricing strategies. In markets where there is little or no competition, companies can employ a pricing strategy that optimizes profits.
This strategy sets the price based on the maximum price the market will pay for the product. On the other, it may not want its profits to be so attractive as to entice cutthroat competition to enter the market within the time window it needs to build market share and establish a leadership position.
This strategy typically works because those likely to buy a new product - the Innovators and Early Adopters - are not particularly price sensitive. If there is considerable uniqueness and desirability built into the product brand, your company can employ a WTMWB strategy. If not, you might consider other effective pricing strategies. Most humans focus on the most significant digit - the "2" in this case. There are exceptions. For some reason, people do not think the food is as good if MSD pricing is used in a high-end restaurant.
If a product is positioned as unique, smart marketing companies will typically use all three of these strategies in combination. When you are pricing your products, what gives you control over the price is the uniqueness and desirability built into your positioning, or branding, strategy. And, if you sell your product in a consumer market, it would be a good idea to also employ an MSD pricing strategy.
Best of luck. News U. Politics Joe Biden Congress Extremism. Special Projects Highline. HuffPost Personal Video Horoscopes. Follow Us. Terms Privacy Policy. Theoretically, it can be graphically represented that as the price of the product decreases, the sale increases, and thereby profit increases. The profit is the difference between the selling price and production price, but as the difference in both decreases, the profit should decrease, but due to bulk selling, the lower profit margin can yield good results for the organization.
This holds up to a certain level beyond which the organization starts to incur losses because the difference in selling price and production price is negligible or zero. If the price is further lowered, then the sale will surely go up, but since the product is priced way below the market average, the firm would go into losses. The other aspect of price competition is price matching and competitive pricing. To understand this, let us consider an example:. Loss leaders the situation in which a company or a shop for an eCommerce website prices one of the product cheapest than others.
This is done in the hope the customer will buy other product while buying the loss leader. This is expected to cover for the losses incurred if any while applying a loss leader strategy. To know more about Loss Leader, click here. A product or brand is priced at a low cost compared to their competitors to gain access and establish a base for the customers and establish brand awareness.
Market penetration is a commonly used price competition strategy by buying new brands in an established market. Products or services are better concerned about the causative and brand image use a premium pricing strategy. Budgetary of pricing premium is also considered as a price competition because the form for the product-wise to differentiate itself from others by being premium. Having a high price gives a feeling of luxury to the customer and appeals to quality-conscious customers.
Companies like Apple have been using premium Pricing for a long time now. In the case of dumping the intention is to ensure that the competitor is out of business which is why the pricing that is followed in dumping is extremely economical compared to the other competitors.
The price of a product or service is way below the average price of other products. Predatory pricing is implemented with the intention of creditor pricing is to discourage computers from entering the existing market. It is also considered as a form of price competition. Free products offered with the purchase of an existing product which gives an edge over the competitors. The price of the free product is compensated in the price of the product, but the fact that it is given for free of cost gives the psychological impact of the product being good and attractive to the customers.
There are various such differences between brands using price competition vs brands using non-price competition or differentiated marketing. Here are 12 differences between price competition and nonprice competition. So as we can see from above, there are many ways that price competition and non price competition can exist in the same market.
Both the strategies have their own advantages and disadvantages. There are two aspects of Price Competition, for customers and retailers or companies. For customers, price competition is beneficial because it gives them the comparative prices of different products and they can choose which is best suited for their needs and which is priced at a low cost. The store is promoting DOWSIL because the profit margin is high as compared to other brands as it is a product of reliance chemicals.
It is priced lower than other brands available. People go by experimental ads i. Here the demand of floor cleaners goes on increasing with the cost, packaging changes and the attractiveness of the advertisement. In my observation I can say that the floor cleaning detergent market is an oligopoly market structure because there are only main players present in the market while considered individually.
Entry is relatively easy but each brand is a different product in itself, hence even though firms are competing with each other each one is a monopoly by itself. All the brands compete with each other. The competition is price and non-price depending upon the elasticity. The brands mainly compete with brand differentiation.
The different brands fight with packaging, new innovation and advertisements. So here we can say the floor cleaning market is having mainly non price competition as the prices are relatively same. On the other hand, local in-house brands are competing on price; they are placing themselves relatively cheaper than others in order to increase their sales. The demand in floor cleaning detergents market is more elastic i. The market share depends upon the amount of work the firm puts on in differentiating its product from the other ones.
They are focusing more on packaging and product quality. This helps in increasing the demand of a particular brand. So we can say that here DOMEX has created its monopoly in the market till the time another firm gets into this very idea i. When this happens the players in the market get into competition again introducing new product with some new difference. They are following price penetration policy.
As compared to other brands, these brands are relatively cheaper. This floor cleaning detergents market actually is a good field to study the economic concepts like market structure, elasticity and competition, and cost factor. According to me, this segment of the market is catering to the high income consumers, there is non-price competition. Since here consumers are less-price sensitive and are affected by the advertisements or product development undertaken by the firm.
Hence, we do not see much price competition in this segment. But there are some local players who are competing with other brands on the basis of price. Instead firms catering to this segment only try to price themselves as cheaply as possible to attract the maximum number of consumers.
In this survey, I have tried my level best to touch up on the different economic aspects that are prevailing in the floor cleaning detergent market. Price Competition Versus Non Price Competition Economics Essay When there is competition in firms on the basis of change in price, it is known as price competition. Non price competition When there is competition in firms on the basis of factors other than price such as advertising, sales promotion, product differentiation, branding etc.
Price competition vs. Firm tries to be the lowest cost giver for the product in the market. The firm must have the vision to respond to the strategy of other firm very quickly. High cross price elasticity must see more of price competition. They promote awareness in the consumer for the differentiation of their product.
High own price elasticity must see more non price competition. Determination of Equilibrium price The market forces of demand and supply determine the equilibrium price.
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