Non-price competition. Big encyclopedia of oil and gas

Since the competitiveness of a product is determined by its ability to withstand competition, competitiveness factors directly follow from the methods of competition. According to the methods of implementation, competition is divided into price and non-price.

Price competition

Such competition involves selling products at lower prices than competitors.

• 1. Offering products at a lower price compared to competitors means use in the enterprise latest technology , allowing to produce more products per unit of time and reduce the level of expenditure of resources, which ensures a lower level of production costs. Timely renewal of the active part of fixed assets makes it possible to prevent the onset of obsolescence of the first type, which, in turn, maintains price competitive advantages, preventing the rise in product prices. Integrated mechanization and automation of production contribute to the release of labor and reduce the share of labor costs in the structure of product costs.
• 2. Another factor that contributes to reducing the cost of products, and hence the possible reduction in prices for it, is the organization of logistics at the enterprise. The success of companies that do not practice building and managing a well-established logistics supply chain can be called into question, because competition is becoming more and more fierce. Efficiently Built logistics chain ensures the movement of materials and inventory that minimizes the formation of unnecessary buffers, such as excess inventory finished products in stock, at manufacturers or wholesalers, i.e. avoidance of money "tied" for as long as the product is not sold.
• 3. Speaking of price competition, it should be noted that the buyer is interested in the full costs of acquiring and operating products, i.e. This is the consumption price, which includes the selling price and operating costs for the entire life of the product.

Non-price competition

Non-price competition is based on distinguishing feature products compared to competitors.

Non-price factors of competitiveness include: ensuring product quality, brand (product recognition), organization of product sales channels, advertising, brand, after-sales service, product novelty.

In a modern market economy, parameters related to the sales process, logistics and reduction of distribution costs are of particular importance in ensuring the competitiveness of products, after-sales service. The competitiveness of products is manifested through the image of the company, i.e. customer perception of the firm based on its business reputation as a manufacturer and supplier.

Speaking about the quality of products, we single out such parameters as technical, aesthetic and regulatory.

1. To the group technical The parameters that are used in the analysis of competitiveness include destination parameters and ergonomic criteria.

Destination options determine the technical properties of the product, its scope and functions that it is intended to perform. They allow you to judge the content of the beneficial effect achieved by using this product in specific conditions of consumption. Assessment of the technical level of the product is especially important for industrial goods and durable goods. Destination parameters generally characterize the possibility of using products in a particular country.

Ergonomic criteria characterize products in terms of compliance with the properties of the human body in the process of performing labor operations and interacting with the machine. They are divided into hygienic, physiological, psychological.

• 2. Aesthetic criteria serve to model the external perception of the product; they reflect just such external properties that are most important for the consumer.
• 3. In addition to the requirements put forward by each individual consumer, there are requirements that are common to all products and must be met. This normative parameters that are set by the current international (ISO, IEC, etc.) and regional standards, national, foreign and domestic standards, current legislation, regulations, technical regulations of the exporting country and the importing country, establishing requirements for products imported into the country, standards of manufacturers of products, patent documentation. For example, electrical appliances must operate at the voltage that is supplied to the network and comply with the requirements of fire safety and explosion safety, and their design is determined by the conditions of the process being carried out.

Patent-legal indicators determine the patent purity of products (the degree of implementation in the product of original technical solutions that are not subject to patents in a particular country). If at least one of the requirements is not met, then the product cannot be brought to the market. Normative indicators include: the share of finished products, parts and parts local production in the proportion established by law; the degree of unification of products and the use of standard parts in it, etc. If the result of the analysis of regulatory parameters is positive, they proceed to the analysis of competitiveness in specific markets.

• 4. Of great importance in ensuring the competitiveness of goods are commercial criteria (organizational and commercial conditions for the sale), which can be conditionally divided into methods of promoting goods and factors of product distribution: the amount of discounts from prices, delivery times, the scope of services provided to buyers in connection with the supply of goods, forms and methods of trading in specific markets.
• 5. Image is the perception of a company or its products by society. An effective image has a huge impact on the consumer's perception of a product: (i) it conveys an exceptional "message" that underpins the consumer's suggestions about the product's quality and benefits; (2) he will convey this message in a specific way, so that he is not affected by similar messages from competitors; (3) it carries an emotional load and therefore affects not only the mind, but also the heart of the consumer.

Developing a strong image requires creativity and hard work. An image cannot be introduced into people's minds in just one night, one viewing of a commercial. It must be constantly disseminated through all available channels of communication with consumers. Companies that are inconsistent in maintaining an image leave the consumer confused and thus may draw his attention to the messages of competitors. The image of a product depends on the image of the organization that produces it, the corporate image can be traced in business reputation, in the company name, in the emblem, symbols, uniforms of employees and much more.

In positioning the organization and products, creating their image, a lot of work is given; advertising aimed at:

• (1) informing potential customers about the firm and its products;
• (2) convincing potential customers that the company's products represent the best solution to customer needs;
• (3) reminding consumers of available options to meet their needs.

Most valuable quality modern marketers call the ability to create a brand. The well-known marketing scientist F. Kotler defines a brand as follows: a name, concept, sign, symbol, design, or a combination of them, designed to identify the goods offered by the seller. The trademark conveys to the buyer information about the product, for example, the trademark "Mercedes" speaks of such properties of the product as "well-designed", "reliable", "prestigious", "expensive". The best trade marks carry a guarantee of quality. The consumer perceives the brand as an important part of the product, so the use of the brand can increase its value, for example, most consumers perceive a bottle of Opium perfume as a high-quality expensive product, but they will consider the same perfume in a bottle without a name to be of lower quality, even if the scent of the perfume is exactly the same .

Well-known brands have buying privileges. They may be preferred, refusing substitute products, even if they are offered at lower prices. It is important that the consumer is loyal to the brand, not the manufacturer. In the field of electronics, such successful brands as Panasonic, JVC, Hyundai, Goldstar, Samsung can be mentioned.

Companies that create branded products are better protected from competitors in promoting them to the market. But even if your company and products have an excellent image, an advertising program that gives a very large influx of customers, it is important to determine the factors commodity circulation , create and implemented, here is the competitive advantage. We are talking about distribution channels, forms and terms of deliveries and after-sales service. Each intermediary that brings the product closer to the end consumer represents one of the levels of the product distribution channel. There are zero-level channel, single-level, two-level, three-level distribution channels.

Channel zero level consists of a manufacturer that sells its products directly to the end consumer. Examples are peddling, mail order.

single level the channel includes one intermediary, such as a retailer. AT two-level There are two intermediaries in the distribution channel. In the market for consumer products, they are usually wholesalers and retailers. three-level the channel includes three intermediaries. For example, in the meat processing industry, a link of small-scale wholesale trade appears between wholesalers and retailers. Small wholesalers buy products from distributors and sell them in small batches to businesses retail. There are also longer distribution channels for products.

The competitor's lack of a retail network is seen as its weak point. Retail network is a place of direct contact with both consumers and products sold. The organization of retail trade, especially at the initial stage, is associated with high costs, but there are certain market conditions, which force the opening of retail stores (dealerships):

• (1) the market is poorly understood, and the manufacturer's firm does not have the financial means to study and sell;
• (2) the amount of pre-sales and after-sales service is negligible;
• (3) the number of market segments is small;
• (4) product range is wide;
• (5) product features determine the small multiplicity of one-time purchases.

For large scale production and promising business it is advisable to have two-level distribution channels - wholesale and retail trade in goods.

A serious criterion of competitiveness is the speed of order fulfillment, the ability to express delivery products and service efficiency. Profitable offer for the supply of products increase its competitiveness. Western marketers believe that the main reason for a customer to leave is unsatisfactory service and the fact that most people are willing to pay more (up to 10% or more) for good service. In some cases, good after-sales service can reduce the cost of consumption (the weight of the costs associated with both the purchase of a product and its use during life cycle). Some manufacturers offer low-interest credit for purchases, longer warranties, or free service and ongoing repairs. Recently, this practice has become widespread in the automotive industry, manufacturers of durable products and small electrical appliances. On competition in the field of services and provision additional services trying to secure a competitive edge for cell phone companies.

The impact of competition on prices.

Thanks to competition, the contradictions between supply and demand are temporarily eliminated, the ratio between which at any given moment affects the level of the market price.

In the conditions of scientific technical revolution competition between firms for superprofits takes a variety of forms.

The change in forms and methods is influenced both by macroeconomic factors, in particular shifts in the structure of the total social product, and by the actions of the firms themselves, for example, improving the policy of fighting for sales markets.

Intercompany rivalry develops primarily in two main directions: intersectoral and intrasectoral competition. What they have in common is the geographic scope of the company's activities (global or regional), as well as the use of legal and illegal methods of competition in order to obtain excess profits.

At the same time, depending on the nature of the product, there may be differences in the forms of competition (price and non-price).

It appears in the following forms:

1) Competition between sellers of homogeneous products, trying to sell goods at the lowest price to force out other sellers and secure the largest sales; this competition lowers the price of the goods offered.

2) Competition between buyers in the same industry, which leads to an increase in the price of the goods offered. Comparison of the available price option with the losses that the buyer may incur as a result of not meeting the need, and the magnitude of this loss determine the willingness of the buyer to raise the price for the desired product.

3) Competition between buyers and sellers; the former want to buy cheaper, the latter want to sell more expensive. The result of this competition depends on the balance of power of the competing parties.

4) Interindustry competition - a firm creating competing industries that produce goods - substitutes that cover the same needs of buyers. The development of such competition can cause both a decrease and an increase in prices in the market. The regulating element in this case is the price of the commodity - a substitute.

AT modern conditions timely renewal of the production range plays an important role in the competitive struggle. The development of a new product development contributes to the growth of sales and an increase in the company's profit margin.

An important aspect of both inter-industry and intra-industry competition in the market is not only the ability of the company to master the production of new goods, but also to stop production activities in markets that are considered unprofitable and unpromising for one reason or another.

Monopolistic competition begins at the stage of capital mobilization. The second stage - the search for a sphere of capital investment is carried out by deploying scientific research, obtaining a new scientific - technical information, market research. The third stage is the implementation of the idea, the production of goods, where the volume of production, product quality and costs are adjusted to the profit maximization program. At the same time, the monopoly is guided not only by the tasks of the current day, but also by long-term goals. The fourth stage is the sale of goods on the market, the struggle unfolds in conditions of price stability around the volume of products sold, the level of their quality, and services. The fifth stage is the use of accumulated profit. The flow of capital encounters obstacles created by the monopoly itself, but its movement nevertheless exists. It takes the form of the creation of competitive industries, the reconstruction and restructuring of consumer industries, the movement of surplus capital accumulated by the monopolies in search of more profitable employment, the movement of capital, rival monopoly groupings, and, finally, the never-ceasing movement of medium and small capital. The rapid renewal of the range of manufactured products leads to an increase in the cost of developing new products.

An important role in the mechanism of renewal of industrial products is played by the price, which should not only justify the costs of creating a new product, provide the company with an acceptable profit, but also form a certain reserve in case of possible losses during the transition to the next cycle of product renewal. Each monopoly has no confidence that by the time a new product appears on the market, its competitors will not release the same or a similar product. Therefore, pricing policy, the purpose of which is to adapt to constantly changing demand, continues to be an important tool in the struggle for sales markets.

The basic principle of the pricing policy for new products is to maintain, even during the period of development of the product and the market, profit at a certain level (principle 2 of costs plus a fixed percentage of markup”). The size of the allowance (rate of profit) depends on the degree of concentration of production or the power of the firm, as well as on the state of market conditions. For non-monopolized firms - from 8 to 15%, for large monopolies from 15 to 34%.

The price policy at different stages of production of a product of one generation changes mainly depending on the degree of market conquest by this product and its efficiency in operation. When products of the first generations appear on the market, companies have some free time when setting prices. This freedom is determined by the degree of "monopoly of quality", patent protection, the price of substitute products, the purchasing power of the consumer and the possibility of mastering the secret of design and production by competitors.

Thus, the dynamics of prices is closely dependent not only on the degree of novelty, but also on the number of generations through which a given product has passed, from the appearance of a fundamentally new product in production to its removal from production and replacement with other fundamentally new products.

After certain period the product is partially obsolete, which allows further price reductions.

1.6.2. "Non-price competition".

Or quality competition. In the competition for sales markets, it is not the one who offers lower prices that wins, but the one who offers higher quality.

A higher-quality product, despite its high price, is much more efficient in operation or consumption than a lower-quality one. But this does not mean that the role of price in determining the competitiveness of a product is small. These two factors are as inseparable as the two sides of labor, commodity, obsolescence, price, and all the phenomena and processes of commodity production.

Price is the factor that ensures profit.

In order to maximize profits, one important psychodogic canon is used, according to which the market price does not increase in proportion to the quality of the goods, but, as it were, ahead of the level and quality of the goods relative to the generally recognized level, the price decreases more progressively compared to this level. This, however, does not fit into the classical system of pricing factors, but is the result of many years of market pricing practice.

Commodity producers producing goods of higher quality than the world level receive monopoly high profits.

In an effort to resist the competition, firms are forced to constantly improve the consumer properties of their products or goods and expand the range of terms of supply and services, although all this is taken into account in one form or another in the price and is ultimately paid by the consumer.

Therefore, it cannot be argued that at present, in the conditions of the rapid development of the scientific and technological revolution, “price” competition has lost its significance.

If during the period of free competition, with relative price stability, competition was expressed in discounts from the price, that is, in its reduction, then in the period of scientific and technological revolution in conditions of inflation, price competition is expressed in varying degrees of price growth for similar products of different quality.

There is a simultaneous and, as a rule, unequal growth in quality and prices (quality growth outstrips price increases).

Thus, quality competition is just one form of price competition.

Often, even in nearby stores, prices for the same goods, albeit 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 nearby retail stores. Competition keeps prices at a level favorable to the buyer, and allows firms, using various methods in the struggle for the market, to attract new customers, as well as increase their profits.

You will learn:

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

What is price competition

Price competition- a type of rivalry in business, which consists in reducing the prices of goods and services. At the same time, this method of market struggle is accompanied by a decrease in the price / quality indicator that is beneficial for the consumer, that is, the buyer begins to pay less for goods and services of equivalent conditions, or receives higher quality products for the same money. As a result, depending on the reaction of competitors, two scenarios for the development of events can occur for the company: a decrease in average profitability or an increase in sales by pulling on some of the consumers. The first scenario entails a drop in the investment attractiveness of the industry. If the firm, as a result of price competition, managed to lure some of the buyers to itself, then profits increase.

The behavior of rivals can have a different character. A competitor's resources to lower the price of a good or service may be limited by the cost of production, and it may not necessarily have enough funds to also reduce the amount requested for the good in competition. One of the features of the rivalry for the buyer is price dumping and, in general, the market - lowering 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 the activity of any commercial company is aimed primarily at making profit, then with dumping it plans to recoup losses in the future, or has a strategy that, despite a strong drop in prices, allows now to gain competitive advantages and benefits that are not available to other market participants.

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

First of all if the cost to the consumer is key factor that determines his decision when choosing similar offers of goods and services.

Secondly, if the firm that started the competition is able to reduce the price of a product or service to such an extent that rivals cannot have a positive profit and start to work at a loss. This strategy can be implemented by a company that has achieved the maximum cost reduction, becoming the leader in terms of production costs. The minimum level of costs allows the company to reach the cost of goods, which is already unprofitable for competitors and will lead to losses.

The main types of price competition:

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

Price and non-price competition: what is the difference

Price competition- the struggle for the buyer and additional profit by reducing production costs and setting final prices, at which neither the assortment of goods nor its quality changes.

Non-price competition- a type of struggle between firms due to technical superiority, raising 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 favorable consumer properties of the product for specific groups of people, improved service and after-sales service, fundamental improvements and changes in the product, large-scale or, conversely, narrowly targeted advertising.

Previously, in the economy, price competition was considered a priority for enterprises, but since the second half of the 20th century, they have increasingly begun to use a type of market struggle that is not associated with a decrease in the cost of production. There is a logical explanation for this - non-price competition has a number of significant advantages for the company.

First of all, cost reduction is unprofitable for the firms themselves, and the smaller the enterprise, the harder it will endure the price competition that has begun. Although it is easier for large companies to compete for price, having a greater margin of safety and financial resources, dumping is also unprofitable for them, since due to the scale the company incurs huge losses - losses in the sale of one product are summed up and turn into a huge amount of total damage.

Secondly, in the conditions of the modern economy, consumer demands have become more complicated, a variety of product options have appeared on the markets, and often a person is ready to give 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 bought even at a low cost. Successful differentiation of products leads to the fact that competition simply disappears, the product, due to its special properties, takes free niche on the market and sold at a favorable price for the company. At the same time, there is simply no one to compete with the company, since its products fully cover the needs of a specific consumer group. Thus, non-price competition and product differentiation can lead to the avoidance of market struggle in principle.

Thirdly, with non-price competition, the costs for the firm are significantly lower than with dumping in the market due to a decrease in cost. The cost of a good promotional video can be significantly less than the loss from sales of goods at reduced prices, while the return on the commercial and the advertising campaign as a whole can increase sales and even take the company to market leaders. 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, the struggle by methods not related to cost reduction requires significant costs: equipment modernization, search and implementation of new ideas, product quality improvement, large-scale advertising campaigns - all this requires a lot of money, but the return can be significantly higher, and at a price competition, almost always the firm faces losses that will have to pay off in the future.

Price competition methods

Monopoly high price- the type of amount requested for goods and services, in which the monopoly 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 set as a result of the release of the vast majority of economic goods by monopolists.

Monopolistically high cost leads to a drop in solvency: the higher the price of the goods, the less willing to buy it. Undoubtedly, each seller is interested in establishing the maximum value of his goods, but in the conditions of today's tough market struggle, it is almost impossible to keep high prices for a long time. The higher the price competition between sellers of the same product in the market, the lower the amount requested for it, and vice versa, with a decrease in rivalry, the cost of the goods increases.

Monopoly low prices. Such prices are set by the largest companies when purchasing goods and services from medium and small firms, when contracts for the supply of raw materials from developing countries, 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, a large buyer dictates his own price to 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 firm 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 formed depending on the buyer. One product can be sold to consumers at different prices, although there will be no difference in quality. Only the approach to sales and customer service is different. There are several types of price discrimination.

1. First degree price discrimination, 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 cost is set for him, but if the client’s solvency is low, then he will be asked for the same product less money. Both consumers will buy a product of the same quality, while paying different amounts.
2. Second degree price discrimination, 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, with a small amount, the price of the goods is set higher.
3. Third degree price discrimination. This discrimination takes into account the elasticity of demand, market segmentation. At the same time, the monopolist allocates market segments 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 charge less.

Table. Comparative characteristics of competition methods

Price Methods		Non-price methods
pros	Minuses	pros	Minuses
Effective in solving tactical problems (penetrating new market, increase in market share, etc.).	Deplete the company. Profits are constantly decreasing, respectively, you need to continuously increase sales.	Longer-term and sustainable competitive advantage.	High qualification requirements for marketing and sales personnel.
They give a quick effect.	Instability of achieved results and low customer loyalty.	More profit with less sales. The results achieved are more stable.	Additional costs as a result of the introduction of non-price methods of competition.
Ease of selling a product or service (cheap goods are easy to sell).	There will always be something cheaper high costs to monitor competitor prices.	High customer loyalty and a large number of repeat sales.

4 Price Competition Strategies

1. Cream skimming strategy. When entering the market new products the company inflates the price in advance in order to quickly recoup the costs of developing and mastering the release, as well as the resources spent on marketing and promotion of the product.
2. Easy penetration strategy. When new products are introduced to the market, the price is lowered to make it easier to enter, as well as to attract the attention of buyers easier and faster.
3. Price differentiation strategy 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, the geography of its sale. The cost of the same products on different continents and in different countries may differ many times.
4. Leadership strategy. The enterprise introduces a new product to the market, but assigns a price for it, like a competitor, giving him the right to test the market for readiness for such a price. At the same time, the quality of the goods may differ in favor of the "catching up", but the cost remains the same, then the phenomenon hidden price competition.

For a successful fight, it is necessary to know well the potential of rivals, their ability to respond to changes in prices and mechanisms for the sale of a product or service, as well as their competitive advantages and vulnerabilities.

Practitioner tells

About the costs of price competition

Boris Vorontsov,

director of the company "Informat", Nizhny Novgorod

In today's competitive struggle, 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 is not engaged 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. .

Profit losses due to a decrease in cost can be compensated by an increase in sales volumes, but such a mechanism will not always work, it all depends on many factors. Price cuts can be used for tactical wins, such as eliminating inventory or weakening direct competitors.

Examples of price competition + thoughtless mistakes

Situation 1. A competitor lowers prices for key commodity items.

Typical reaction. We find the same products at our place and make a discount on them, perhaps even more than that of competitors.

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

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

An experience. A quick price cut following competitors does not end in anything good, as a result, everyone suffers: some firms go bankrupt, some are forced to spend their own and third-party assets in order to stay afloat. On the other hand, the store can offer discounts during a certain time range, for example, on Saturday from 12 to 13 noon, so it will attract customers during this period, and outlets competitors will be empty.

Situation 2. A competitor sells a product at a price below 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. The competitor company, which 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. We, in pursuit of competitors, are forced to do everything in haste, which is expensive and not always effective.

Recommendation. Do not rush, calmly think over your advertising moves, make discounts by tying the dates to some calendar events, holidays, weekends, set a discount a little more than that of rivals, start your events on the last days of the competitor's promotions or immediately after the end her advertising period.

An experience. The household chemicals store has launched a monthly promotion "For everything minus 30%". The company first lost a significant number of customers who went to another seller for a good price, 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 for shaving products and men's goods. The third week was marked by a discount on gifts for International Women's Day - the company made a sale of cosmetics, in the fourth week it announced a promotion during which it provided a discount from 10 to 12 in the morning, 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 by several times.

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

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

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

Recommendation. Do not chase competitors and look back at its shares, develop your own, attract a buyer certain groups products that competitors do not have, improve service and quality of service, conduct your own unique advertising moves and sales.

An experience. A home care company ran into a competitor who made shampoos with the same packaging and design. The company moved away from direct price competition by changing the packaging design and investing a large amount of money in the promotion and promotion of a new brand. Moreover, active and thoughtful advertising campaign made it possible to start selling products in a higher price segment of the market, which, while maintaining production costs at the same level, led to an increase in profits several times.

Another example. The company has long been engaged in the design, tailoring and sale of curtains through a stationary store. But a major network rival appeared in the city, luring buyers away with low prices. In the competitive struggle, a new strategy of behavior in the market was developed. The company began to offer the services of a visiting designer, who, already on the spot, was able to show and tell in the catalog which version of the curtains suits the customer, and for the client this service was free. 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 the spot not only the design of curtains, but also the interior of the premises as a whole.

Expert opinion

Price splitting is the way to win the price war

Katerina Ukolova,

CEO, Oy-li

We encountered dumping in the market of technically sophisticated devices 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 up with a price splitting strategy, separating the price of the goods, the cost of delivery, equipment installation and subsequent post-warranty service from the total amount. Instructions have also been developed to allow our sales managers to bypass the inconvenient questions from customers that a competitor has a lower price.

Market monitoring showed that the competitor's prices differ slightly, sometimes even upwards due to the different exchange rates for which the equipment was purchased. We began to pay more attention to service and increased customer focus, our managers accompanied each customer from the very beginning of the transaction to end result. Such a long-term strategy allowed our company to earn the trust of consumers and additionally gave an increase in sales by 40%.

Unfair price competition

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

• Method of contrast and alternative price.

This method consists in a psychologically difficult moment for the buyer, when he, in terms of "expensive" and "cheap", cannot navigate and is not aware of the real price of the goods.

This technique has a number of limitations, the main of which is that in the market of a product or service there must be a certain circle of sellers or one, but creating pseudo-competitors. For the buyer, a kind of presentation is arranged, the essence of which is to suggest to him that the price of the goods is real and objective, even though it can be overestimated several times.

To do this, the seller, who is 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 he also has it more than the market one). As a result, the buyer, having passed, for example, five front stores, comes to the “main seller” and, seeing his goods at a price lower than those of alleged competitors, buys it with complete satisfaction, not even suspecting that he overpaid for it many times more. its real value. But in other places 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 profitable one.

• Simpleton method.

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

So, for example, in one European capital, the seller specifically wrote price tags with grammatical errors and put them on the main windows. When he was pointed out his errors, he replied that he knew about them, but this method in the eyes of the buyer presents him as a simpleton and a redneck, 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 ways of unfair competition is dumping. It usually involves trying foreign manufacturers capture some new markets by supplying goods and services at lower prices. Dumping is widely used both in foreign markets and in domestic ones.

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

Profit = price - costs

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

Under these conditions, many firms began to search for methods of competition. One of them was the 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, because the method is paradoxical: selling a product below the cost of its release 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 a convenient tool for price competition - dumping.

Let's consider a situation on a simple example of 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 gives a stable profit to all these firms. And now the city opens big store with similar products, but prices are 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 for CDs so that they paid back the costs of dumping and selling CDs below cost, and made more profit by becoming a monopoly 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 monopoly raises prices, recoups the costs of the dumping campaign and can single-handedly set the price of a certain type of product, extracting excess profit from this situation.

But for successful dumping, a margin of financial strength is always needed - if a company miscalculates 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 firm that has begun the dumping struggle. In any case, the buyer benefits from dumping, since the cost of the goods decreases, but in the future the same products can increase in price by a multiple. 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 two times lower - $ 200. American buyers benefited from this situation, and the Japanese company managed to win a 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 effective tool market regulation. So, we can consider the situation with oil in the second half of the 20th century. The Union of Petroleum Exporting Countries (OPEC) raised oil prices several times in the early 1970s. This gave impetus to the development of alternative methods and technologies for the extraction of black gold, oil development became profitable even where it was not economically feasible before. Small and medium-sized firms began to create new technologies, invest finances 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 lowered prices. As a result, the firms that invested in this business went bankrupt and suffered huge losses. The cartel, having eliminated competitors, gradually raised prices and compensated for the losses incurred as a result of competition. The cartel not only carried out a long-term action to prevent rivals from entering the oil market, but, 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: a step by step guide

Step 1. We raise prices.

Paradoxically, the increase in price does not lead to a drop in profit: the table below shows that when the price went down, the number of orders increased, so did the revenue, but the profit fell.

Supplier price	retail price	Your profit	Your markup	The number of orders	Income	Your profit

When the price increased, the number of orders decreased, so did the revenue, but the overall profit increased.

Step 2. We introduce an additional service.

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 looking through them to find best deal. Prices in all stores are approximately equal, but in one they offer goods that are not only in stock, but also the opportunity to order the necessary item from the supplier's catalog. Moreover, this store provides free delivery of purchases to the apartment, if necessary, installation and connection, as well as setting up and solving the problems of compatibility of components. As a result, having studied the offers from all the stores, you will most likely choose the one that offers such a convenient service for the client, and even does not take 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 it will ensure stable customer interest and leadership in the competition.

Step 3. We complete sets of goods.

For the buyer, sets of goods are convenient for specific purposes. If they are compiled correctly and logically, then the buyer will most likely not look at the price of such kits, choosing their practicality.

Let's consider sets on the simplest examples.

Cloth:

• jeans and a belt matched to them in color and texture;
• shirt and tie, possibly cufflinks;
• sets of working overalls, selected for specific working conditions.

Technics:

• photographer's kit: camera, lenses, flash, batteries, optics cleaners;
• a set of a fisherman: fishing rods, fishing line, hooks, spinners, camping furniture, tents for winter fishing.

Sets allow the seller to generally increase average check, and with it the profit grows. But it is necessary to compose kits so that they are really useful and logical.

Step 4We 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 site we can see two prices:

1. Low price for goods, minimum. But the store sets this amount without shipping costs, the purchase will need to be picked up at the store yourself. In addition, this price is valid for pre-order only, and the waiting time can be more than seven days.
2. The price of the same item is higher but the store will deliver it to the apartment itself, while 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 for a personal appearance at the point of issue. If the buyer chooses a higher price, he receives free shipping 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 done constantly, it consists of the following actions:

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

Practitioner tells

How to convince to buy more

Vasily Bayda,

CEO INSKOM Solutions, Moscow

We are constantly faced with the desire of customers to reduce prices, optimize their costs, while large buyers, due to the large volume of orders, are trying to impose a minimum price bar on us. Since we work with large Western chains, our main argument in counteracting attempts to impose our own, low price on us, we put forward our service: we have placed emphasis on the quality of supplies, on their continuity, on the fulfillment of the order just in time. This allows us to reasonably oppose lowering our prices by consumers and sell goods on favorable terms for us, while the client agrees and is ready to pay more for our convenient and high-quality service and the guarantee that delivery times will be strictly observed and his risks of loss due to problems supplier are minimal or reduced to zero.

Method 1. Operate with facts, show potential clients the history of your work with customers and those positive results that they have achieved by working with you. Show your customers 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, clearly point it out to him. Conduct an analysis of how the leaders of the area in which your customer operates work, make a comparison and recommend to your new customers any changes that can improve their business, optimize costs, and bring profit. Remember successful activity 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 do not buy from companies, but, above all, from other people. If the client knows that your business is stable, 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. Constantly look for and attract new customers- sometimes it is easier for a new consumer to sell a product for a higher price than to sell products to old customers at the same price. Maintain a flexible pricing policy depending on who you work with. Rely on your employees, encourage them to search and attract new customers. For example, offer 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 brought to you by an employee.

Information about experts

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

Vasily Bayda, CEO, INSCOM Solutions, Moscow. Graduated from Moscow State University Economics, Statistics and Informatics (MESI). At L'Oreal, he led the Luxe and Drug networks. Since 2010 - General Director of INSCOM Solutions (INSCOM LLC). He is fond of rowing, boxing, motorcycles.

Boris Vorontsov, director of "Informant", Nizhny Novgorod. "Informant" is a competitive intelligence agency specializing 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 the countries of near and far abroad.

To understand the mechanism of competition great importance has a correct identification of the reasons due to which it is possible to bypass . 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 a lower (cost) offered product or service. In practice, it is applied big companies, focused on mass demand, firms that do not have sufficient strength and capabilities in the field of non-price competition, as well as in the course of penetrating markets with new products, while strengthening their positions in the event of a sudden aggravation of the problem. In direct price competition, firms advertise widely the price reductions of manufactured and commercially available goods. With hidden price competition, a new product with significantly improved consumer properties is introduced to the market, while the price rises slightly. The extreme form of price competition is "price wars" - crowding out competitors by gradually reducing prices based on the financial difficulties of competitors offering similar ones, the cost of which is higher.

Non-price competition is widespread where the decisive role is played by quality, its novelty, design, packaging, corporate identity, subsequent service, non-market methods of influencing the consumer, i.e. factors indirectly related or not at all dependent on price. During the 80s and 90s leading place the list of non-price factors includes reduced energy consumption and low metal consumption, complete absence or low pollution environment, crediting the delivered goods as a down payment for a new one, advertising, a high level of warranty and post-warranty service, the level of related services.

Sony on early stages mass marketing of its products on the Russian market faced a problem in the field of non-price competition. The problem was that under the existing internal warranty rules for products sold in Russia, consumers can only return faulty equipment after five attempts to repair it. Russian rules trade, however, allow the consumer to return the goods as soon as defects are discovered. All trading companies in Russia are subject to these rules. In order to increase sales with confidence, Sony has not only adjusted its warranty policies to regional requirements, but also significantly reduced the warranty period for the most requested products. As a result, the company strengthened its position in the non-price sphere of competition.

Illegal methods of non-price competition include industrial espionage; enticing specialists who own trade secrets; release of counterfeit goods.

In general, unfair competition can be attributed to one of the types of non-price competition, since it creates advantages in the non-price spectrum through actions that are contrary to fair practices in industrial and trade affairs. In accordance with Art. 1Obis of the "Paris Conference on the Protection of Industrial Property" these include all acts capable of causing confusion in any way with respect to the establishment, goods, industrial or commercial activities of a competitor; false statements while exercising commercial activities capable of discrediting an enterprise, goods, industrial or trading activity competitor indications or statements, the use of which in the course of commercial activities may mislead the public about 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 treats unscrupulous.

Usually, the presence of powerful non-price competition is associated with a high level of development of market relations. In most stable markets of economically developed countries, non-price competition is the most common form of competition. Against, Russian market more often characterized by the predominant development of price competition. The low solvency of consumers makes it possible to compete effectively at the expense of lower prices.

Price competition

Price competition is a competitive struggle by lowering prices to a level lower than competitors. At the same time, by improving the price / quality ratio from the point of view of the consumer, the competitiveness of the product in the market increases. Depending on the reaction of other market participants (whether they respond with an adequate price reduction or not), either the company increases its sales, pulling some of their consumers to its product, or decreases average profitability(and hence the investment attractiveness) of the industry.

Competitors do not have to respond with similar price cuts. The ability of each competitor to reduce the price is limited by its total cost per unit of output. Selling products at a price below them full cost called dumping. A commercial company can sell its products for a long time at a price below their full cost only if there is an additional external funding. But since any commercial company is focused on making a profit, with dumping, it either expects to recoup these losses in the future, or low product prices allow it to receive other benefits that are not obvious or inaccessible to other market participants right now.

It is advisable to resort to price competition when two conditions are met. First, if you are sure that the price is a decisive factor for your potential consumer when choosing between competing products. Secondly, companies that have achieved industry leadership in costs usually resort to price competition - in this case, you can make a profit even at such prices when all other players are already operating at a loss.

Distinguish:

direct price competition with wide notification of price reductions;

hidden price competition, when a new product with improved consumer properties is launched on the market with a relatively slight increase in price.

Price competition is realized in the desire of competing economic entities to attract consumers by setting prices lower than those of a rival. At the same time, they race to reduce the costs of the consumer for the purchase of goods, thereby increasing his profit from the purchase and increasing the margin of competitiveness of their products. As a result of such competition, prices are set that correspond to the real costs of production, and the efficiency of placing resources on the market increases by removing inefficient producers with high production costs from it. reverse side The price competition of commodity producers is the process of price competition of consumers, who, by their decision, influence the behavior of commodity producers. The price choice of consumers determines the level of demand, the change of which affects the volume of supply of competitive producers.

Price competition is motivated by ensuring survival, maximizing current profits, maintaining and providing liquidity, gaining a large market share, and gaining market leadership. Foreign large and super-large corporations in most cases are satisfied with about 10% profitability share capital which ensures their survival. Ensuring survival is the main motive of an economic entity in cases where there are too many producers on the market and fierce competition reigns or the needs of buyers change dramatically. Survival pricing is driven by the producer's attempt to sustain or slightly reduce price competition. In this case, prices are set at a level that ensures the break-even business. Such a policy is short-term in nature and is an attempt to "buy" time until the commodity producer is able to reduce costs sufficiently to make a profit, or the market situation will not lead to higher prices. Maximization of current profit leads to an increase in profitability, expansion of the reproductive capabilities of the economic entity. In market conditions, maintaining and ensuring liquidity is always relevant, since a steady insolvency threatens an entrepreneur with bankruptcy. Therefore, he seeks to determine the conditions and prerequisites that ensure stable solvency.

The expansion of market share implies the pursuit of market leadership, which provides the opportunity to have the lowest costs and the highest long-term profits. Achieving this goal, the economic entity goes to the maximum possible price reduction. Price leadership reflects the position of an economic entity in the market as one of the most active in setting general price levels for certain types of products. Achieving this goal presupposes that the economic entity has sufficient potential.

Price competition develops in the market in close connection with the conditions and practices of non-price competition, acts in relation to the latter, depending on the circumstances, the market situation and the policy pursued, both subordinate and dominant. This is a price based method. Price competition "goes back to the days of free market rivalry, when even homogeneous goods were offered on the market at a wide variety of prices. Price reduction was the basis by which the seller singled out his product ..., won the desired market share" Rumyantseva E.E. New economic encyclopedia. - M.: INFRA-M, 2005. - S. 219.

In conditions modern market"price war" is one of the types of competitive struggle with a rival, and such a price confrontation often acquires a hidden character. Price war in open form is possible only until the moment when the company exhausts the reserves of the cost of goods. In general, price competition in an open form leads to a decrease in the rate of profit, deterioration financial condition companies. Therefore, companies avoid open price competition. It is currently used usually in the following cases: by outsider firms in their fight against monopolies, for which outsiders have neither the strength nor the opportunity to compete in the field of non-price competition; to enter markets with new products; to strengthen positions in the event of a sudden aggravation of the sales problem. With covert price competition, firms introduce a new product with significantly improved consumer properties, and raise prices disproportionately. At the same time, it should be noted that in the conditions of functioning of different markets, the degree of significance of price competition can vary significantly. As a general definition of price competition, the following can be given: "Competition based on attracting buyers by selling at lower prices goods similar in quality to competitors' goods" Big economic dictionary/ Under the editorship of A.N. Azrilyana. - 5th ed. add. and reworked. - M.: Institute of New Economics, 2002. Cit. by: http://yas. yuna.ru/.

The framework that limits the possibilities of price competition is, on the one hand, the cost of production, on the other hand, the institutional features of the market that determine the specific structure of sellers and buyers and, accordingly, supply and demand.

The selling price consists of the cost of production, indirect taxes included in the price, and the profit that the seller expects to receive. At the same time, the price level is set in the market by the ratio of supply and demand, which determines one or another level of return on assets and profitability of the products produced by the enterprise.

To date, the most common pricing strategy, which is chosen by about 80% of companies, is "following the market." Enterprises that use it set prices for their products, focusing on a certain average price list. However, it is difficult to call it a conscious choice. Most of the time it's just not possible to do otherwise. As a rule, "to be like everyone else" is for those who work in mass markets, where competition is very high. This provision fully applies to the meat market. In the current situation, buyers react very painfully to any noticeable rise in the price of goods, which does not allow overpricing, and competitors respond harshly to any attempt to change the existing proportions of sales, which makes another pricing strategy dangerous - "introduction to the market".