Price

The price of a commodity represents the value the consumer’s place on it and the revenue the producers want from it.

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Demand Curve

The demand curve shows the relationship between price and quantity demanded and is one of the most basic and important tools for analyzing consumer’s side of the market.

Price Competition

In price competition, the firm’s try to capture the market by lowering the price since lower price will increase demand. Hence firms try to beat each other in prices. Consumers usually shift to the lowest priced brand hence price competitors will usually have prices very near to each other.

Non – Price Competition

In Non -Price Competition firms try to increase sales and market share by competing with rivals in areas like branding and advertising.

The firm builds loyalty towards the brand by emphasizing product features, service, quality etc. The firm make sure that the consumer must be able to distinguish brand through unique product features and perceive the differences in brands and view them as desirable .Another form of non-price competition is patents through which the firm makes it difficult for competitors to emulate the differences between firms and there product. The firm tries to eliminate its price difference with its competitors through non-price competition, where by it off-sets the price difference by the perceived benefits of its product.

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Demand Curve for two different brands of the same product

The above picture shows the demand curve of two competing firms where one firm’s demand curve is shifted out to the right by stressing distinctive attributes, hence consumers perceive and desire particular attributes thereby having a greater demand for one firms product at the same prices.

Example which differentiate Price and Non- Price Competition

For instance, two restruants selling the same kind of cuisine and located right next to each other will have very similar or may be exactly same prices on their Menu Cards. Hence, these restraunts are engaging in price competition. Since they are selling exactly the same cuisine and are located right next to each other, if one price to charge the higher than the other it will lose all its customers. This is a form of price competition.

Now consider two restaurants selling totally different kind of cuisines. One is a Chinese restaurants and the other is a Greek Restaurants , then we can expect that even tough both are situated right next to each other they might be charging totally different prices for their food and still getting customers. This is a case of non-price competition because each restaurants has its own differenciated product that it can afford to sell at a different price and still get customers.

Product Development

It basically focuses on creating a good brand image. Non-price competition typically involves promotional expenditures, (such as advertising, selling staff, the locations convenience, sales promotions, coupons, special orders, or free gifts), marketing research, new product development, and brand management costs.