Price competition, its types and methods of implementation. Non-price competition

Competition methods are methods common in the economy that allow an enterprise in market conditions to attract the attention of customers, develop, and exist successfully. It is customary to divide currently known methods into economic and conditional economic. The first suggest appropriate methods of behavior, and the second - other possible attempts to influence the position that the company currently occupies.

Economic methods of competition

There are two key approaches: playing with costs, with prices. Influence through prices is an option when a company resorts to a floating pricing policy. The main task is to force the opponent to leave this niche. Often, to achieve a goal, an enterprise sets the price of a product significantly below the norm. The competition method produces the greatest effect if the decline occurs sharply and is unpredictable for rivals. The company adheres to this pricing policy until it succeeds in squeezing the competitor out of the niche. Equally satisfactory are the options when the opponent completely stops activities, and when he chooses a different direction as an attempt to avoid barony.

If the applied methods of competition gave the desired result and the competitor was removed from the market, prices can be restored to their previous level. In some cases, an enterprise can afford to raise the cost above the previous standard. This allows you to compensate for the losses that were associated with the period of competition.

Advantages and disadvantages

The most weak side of the described approach to eliminating rivals is the fact that the opposite side can also resort to a similar line of behavior. Competition in the market is often unpredictable, and an accurate assessment can only be made in advance if there is extensive and correct data on the financial condition of the competitor.

The winner remains with those who have a large supply of money at the start of the “battle.” As soon as the first signs of competition appear in the niche where the enterprise operates, it is necessary to tune in to a fight from which only one can emerge victorious. However, as practice shows, only large monopolies currently seriously compete in this way, while most medium- and small-sized companies simply adjust to the generally accepted price level. For such market participants, other forms and methods of competition are relevant.

Costs as a way to fight an opponent

The main idea of ​​this method of competition is to reduce to a minimum the costs associated with the process of production and sales of products. Enterprises are resorting to all legal tools that allow them to at least slightly reduce the cost component of their business. It is taken into account that manufacturing the same product in different ways can be very expensive or vice versa. The influence is exerted by technological features of production, automation of work lines, and the streamlined workflow. It becomes very important for an entrepreneur to establish an organized working day - this is one of the methods not to price competition.

In an effort to minimize costs in the production and sales process, many try to use the most inexpensive raw materials. This often leads to low quality of the finished product, which, as practice shows, does not stop companies that are immersed in competitive methods in an attempt to win a place in the market.

At any cost!

A widespread practice of reducing costs associated with the production and sales process is to attract cheap labor. This option often runs counter to current legal norms countries. This is not only about competition law, but also about employment rules. Enterprises hire illegal, semi-legal workers who are willing to work full-time hard work for low wages. However, you should not expect that such employees will work really well, producing high-quality goods.

How to appeal to a cheap labor force, and other methods of non-price competition can reduce enterprise expenses. This means that by keeping prices equal to competitors in the vast market, the company can count on greater profits. This technique is quite typical for both small and medium-sized businesses.

Conditional-economic: looking in more detail

There are several methods combined in this group to increase the competitiveness of an enterprise. If the ones described earlier made it possible to influence an opponent, then this group was developed on the idea of ​​​​attracting more buyers.

The simplest way, which is completely subject to the law on protection of competition, is legal, correct and does not lead to a decrease in the quality of services - this is to expand the range. The company thus forms a line of offers so that the client can find anything for himself, regardless of his wishes, no matter how specific they may be. This applies not only to names, but also to packaging. For example, a classic package of milk is one liter in volume, but to meet the needs of a certain category of customers, containers of 100 ml, 330 ml, half a liter or one and a half are produced.

Selection and pricing policy

As they say in the economics course in any specialized educational program, you can apply knowledge of the concept and types of competition to improve the company’s position in the market. How does this happen within the approach described above? As we were able to identify, the sale of goods that are in stock in different options design, always more than that which exists only in one form.

This type of competition is beneficial for the enterprise, as well as for the client: small packages can be set at prices that, in terms of the net weight of the product, will be higher. The company makes a profit, the client gets the product he needs. Additional tools for this type of competition (the concept was given above) are changing the design solution. The more modern and brighter a product looks, the more willing they are to buy it. It is worth taking into account fashionable music, popular films - in a word, even aspects of social life that are not directly related.

Often, even in nearby stores, prices for the same goods, although 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 that is beneficial to the buyer and allows firms, using various methods in the struggle for the market, to attract new customers and also increase their profits.

You will learn:

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

What is price competition

Price competition is a type of competition in business that involves reducing prices for goods and services. Moreover, this method of market struggle is accompanied by a reduction in the price/quality ratio that is beneficial for the consumer, that is, for goods and services of equal standards, the buyer begins to pay less, or for the same money receives products of higher quality. As a result, depending on the reaction of competitors, two scenarios may occur for the company: a decrease average profitability or increasing sales by attracting some consumers. The first scenario entails a decline in the investment attractiveness of the industry. If, as a result of price competition, the company managed to lure some buyers to itself, then profits increase.

The behavior of rivals can be of a different nature. A competitor's resources to reduce the price of a product or service may be limited by the cost of production, and it will not necessarily have enough funds to also reduce the amounts requested for the product in competition. One of the features of competition for buyers is price dumping and the market as a whole - reducing 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 activities of any commercial company are aimed primarily at making a profit, when dumping it plans to recoup losses in the future, or has a strategy that, despite a strong price drop, allows it to already 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.

Firstly, if cost to the consumer is a key factor determining his decision when choosing similar offers of goods and services.

Secondly, if a company that has begun to compete is able to reduce the price of a product or service to such an extent that rivals will not be able to have a positive profit and will begin to operate at a loss. This strategy can be implemented by a company that has achieved maximum cost reduction, becoming a leader in product costs. The minimum level of costs allows the company to reach the cost of goods, which is no longer profitable for competitors and will lead to losses.

Main types of price competition:

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

Price and non-price competition: what's the difference?

Price competition– the struggle for the buyer and additional profit by reducing production costs and setting final prices at which neither the range of goods nor their quality changes.

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

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

Firstly, the reduction in cost is unprofitable for the firms themselves, and the smaller the enterprise, the more difficult it will be to withstand the price competition that has begun. Although it is easier for large companies to compete on price, having a greater margin of safety and financial resources, dumping is also unprofitable for them, since due to its scale the company incurs colossal losses - losses on the sale of one product add up and turn into a huge amount of total damage.

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

Third, with non-price competition, the costs for the company are significantly lower than with dumping on the market due to a decrease in cost. The costs of a good advertising video can be significantly less than the losses from selling goods at reduced prices, while the return on the video and the advertising campaign as a whole can increase sales volumes and even make the company a market leader. Sometimes small change properties of a product, if initially successful, can make it much more convenient for the buyer and increase its attractiveness while maintaining the cost and even increasing it.

Undoubtedly, fighting with methods not associated with cost reduction requires significant costs: modernizing equipment, searching and implementing new ideas, improving the quality of goods, large-scale advertising campaigns - all this requires a lot of money, but the return can be significantly higher, and with a price competition, a company almost always faces losses that will have to be recouped in the future.

Price competition methods

Monopoly high price- a type of amount requested for goods and services at which a monopolist 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 established as a result of the monopolists releasing an overwhelming amount of economic goods.

Monopoly high cost leads to a drop in solvency: the higher the price of a product, the fewer people want to purchase it. Undoubtedly, every seller is interested in establishing the maximum cost of his goods, but in the conditions of modern tough market competition it is almost impossible to maintain high prices for a long time. The higher the price competition in the market between sellers of the same product, the lower the amount they ask for it, and vice versa, as competition decreases, the cost of the product increases.

Exclusively low prices. Such prices are set by the largest companies when purchasing goods and services from medium and small firms, in 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, they force small and medium-sized organizations to sell their products, components and services at a reduced cost; in this case, the large buyer himself dictates his price to the 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 company 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 determined depending on the buyer. One product can be sold to consumers at different prices, although there will be no differences in quality. The only difference is the approach to sales and customer service. Price discrimination has several types.

1. Price discrimination of the first degree, 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 price is set for him, but if the client’s solvency is low, then he will be asked for less money for the same product. Both consumers will buy a product of the same quality, but will pay different amounts.
2. Price discrimination second degree, 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, but not large quantities the price of the product is set higher.
3. Third degree price discrimination. This discrimination takes into account the elasticity of demand and market segmentation. At the same time, the monopolist identifies areas of the market 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 set the price lower.

Table. Comparative characteristics of competition methods

4 price competition strategies

1. “Skimming” strategy. When introducing a new product to the market, the company inflates the price in advance in order to quickly recoup the costs of development and launch, as well as resources spent on marketing and promotion of the product.
2. Easy penetration strategy. When introducing a new product to the market, the price is lowered to make entry easier and to attract the attention of buyers more easily and quickly.
3. Strategy for price differentiation 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 and the geography of its sales. The cost of the same products for different continents and in different countries may differ many times.
4. Strategy for chasing the leader. An enterprise introduces a new product to the market, but sets the price for it like a competitor, giving it the right to test the market’s readiness for such a price. In this case, the quality of the product may differ in favor of the “catch-up” one, but the cost remains the same, then the phenomenon arises hidden price competition.

To successfully fight, it is necessary to have a good knowledge of the potential of rivals, their ability to respond to changes in prices and mechanisms for selling a product or service, as well as their competitive advantages and vulnerabilities.

The practitioner tells

About the costs of price competition

Boris Vorontsov,

Director of the company "Informat", Nizhny Novgorod

In modern competition, 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 does not engage 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 .

Loss of profit due to a decrease in cost can be compensated by an increase in sales volumes, but such a mechanism will not always operate; it all depends on many factors. Price reductions can be used for tactical wins, such as clearing inventory or undermining direct competitors.

Examples of price competition + thoughtless mistakes

Situation 1. A competitor reduces prices on key product items.

Typical reaction. We find the same products in our country and make a discount on them, perhaps even greater than that of competitors.

Where is the mistake. The company perceived the competitor’s actions as an aggression against itself, although in fact its measures were aimed at the consumer and stimulating him to purchase the product.

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

Experience. A quick price reduction following competitors' lead does not end well; in the end, everyone suffers: some firms go bankrupt, others are forced to spend their own and third-party assets in order to stay afloat. On the other hand, a store can offer discounts during a certain time range, for example on Saturday from 12 to 13 pm, so it will attract customers during this period, and competitors' outlets will be empty.

Situation 2. A competitor sells a product at a price lower than 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. A competing company that 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. In pursuit of competitors, we are forced to do everything on a quick fix, which is expensive and not always effective.

Recommendation. Don’t rush, calmly think through your advertising moves, make discounts by tying the dates to some calendar events, holidays, weekends, set a discount a little more than your competitors, start your events in last days promotions of a competitor company or immediately after the end of its advertising period.

Experience. The household chemicals store launched a monthly promotion “Minus 30% on everything.” The company initially lost a significant number of customers who went to another seller for a good price, and 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 on shaving products and men's products. The third week was marked by a discount on gifts for the International women's day- the company had a sale on cosmetics, in the fourth week it announced a promotion during which it provided a discount from 10 to 12 am, 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 several times.

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

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

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

Recommendation. Don’t chase your competitors and look at its promotions, develop your own, attract customers with certain groups of products that your competitors don’t have, improve service and quality of service, conduct your own unique advertising campaigns and sales.

Experience. A company producing household chemicals was faced with a competitor that produced shampoos in the same packaging and with a similar 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 the new brand. Moreover, an active and well-thought-out advertising campaign made it possible to begin selling products in a higher price segment of the market, which, while maintaining production costs at the same level, led to a several-fold increase in profits.

Another example. Company for a long time was engaged in design, sewing and selling curtains through a stationary store. But a major chain rival appeared in the city, luring away customers with low prices. In the competition, a new market behavior strategy was developed. The company began to offer the services of a visiting designer, who, already on site using the catalog, was able to show and tell which option of curtains was suitable for the customer, and this service was free for the client. 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 site not only the design of curtains, but also the interior of premises in general.

Expert opinion

Price splitting is the path to victory in a price war

Katerina Ukolova,

CEO, Oy-li

We encountered dumping in the market for technically complex 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 to a price breakdown strategy, separating from the total amount the price of the product, the cost of delivery, installation of equipment and subsequent post-warranty service. Instructions have also been developed to allow our sales managers to bypass inconvenient questions from customers about whether a competitor has a lower price.

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

Unfair price competition

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

• Contrast and opportunity cost method.

This method lies in a psychologically difficult moment for the buyer, when, in terms of the concepts of “expensive” and “cheap”, he cannot navigate and does not realize real price goods.

This technique has a number of limitations, the main one of which is that in the market for a product or service there must be a certain circle of sellers or one, but creating pseudo-competitors. A kind of presentation is arranged for the buyer, the essence of which boils down to convincing him that the price of the product is real and objective, even despite the fact that it may be inflated several times.

To do this, a seller 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 his price is higher than the market price). As a result, the buyer, having gone through, for example, five fake stores, comes to the “main seller” and, seeing his product at a price lower than that of his supposed competitors, buys it with complete satisfaction, without even suspecting that he overpaid for it many times more its real value. But in other places it’s 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 favorable price.

• The simpleton's method.

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

So, for example, in one European capital the seller deliberately wrote price tags with grammatical errors and displayed them on the main windows. When his errors were pointed out to him, he replied that he knew about them, but this method in the eyes of the buyer makes him look like a simpleton and a hillbilly, 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 methods of unfair competition is dumping. It is usually associated with attempts by foreign manufacturers to capture some new markets by supplying goods and services at higher prices. low prices. Dumping is widely used both in foreign and domestic markets.

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

Profit = price – costs

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

Under these conditions, many firms began to search for methods of competition. One of them turned out to be 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, since the method is paradoxical: selling a product below the cost of its production 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 the situation at simple example 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 provides a stable profit to all these companies. And now a large store opens in the city with similar products, but at prices 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 on CDs so that the costs of dumping and selling CDs below cost are recouped, and they also make a profit due to the fact that they became monopolist 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 monopolistically raises prices, recoups the costs of the dumping campaign and can single-handedly set the price of a certain type of product, extracting excess profits from this situation.

But successful dumping always requires a margin of financial strength - if a company incorrectly calculates 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 company that has begun the dumping fight. In any case, the buyer benefits from dumping, since the cost of the product decreases, but in the future the same product can increase in price multiple times. 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 half as low - $200 . American buyers benefited from this situation, and the Japanese company managed to conquer 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 monopoly high prices is an effective tool for regulating markets. So, we can consider the situation with oil in the second half of the 20th century. The union of oil 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 in places where previously it was not economically feasible. Small and medium-sized companies began to create new technologies and invest finance 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 reduced prices. As a result, the companies that invested in this business found themselves bankrupt and suffered colossal losses. The cartel, having eliminated competitors, gradually increased prices and compensated for losses incurred as a result of competition. The cartel not only carried out a long-term campaign to prevent rivals from entering the oil market, but also, 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: step-by-step instructions

Step 1. Raise prices.

Paradoxically, an increase in price does not result in a drop in profits: the table below shows that with a decrease in price, the number of orders increased, and income also increased, but profits fell.

When the price increased, the number of orders decreased, and income decreased, but overall profits increased.

Step 2. We introduce an additional service.

Let's 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 browsing through them to find the best deal. Prices in all stores are approximately the same, 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 your apartment, installation and connection, if necessary, as well as configuration and solution to any problems with compatibility of components. As a result, after studying the offers from all stores, you will most likely settle on the one that offers such a convenient service for the client, and even does not charge 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 they will ensure stable customer interest and leadership in the competition.

Step 3. We complete sets of goods.

For the buyer, product sets are convenient for specific purposes. If they are compiled competently and logically, then the buyer with a high degree of probability will not look at the price of such kits, choosing their practicality.

Let's look at the sets using simple examples.

Cloth:

• jeans and a belt that matches them in color and texture;
• shirt and tie, possibly cufflinks;
• sets of work clothing, selected for specific working conditions.

Technique:

• photographer's kit: camera, lenses, flash, batteries, lens cleaning products;
• fisherman's set: fishing rods, fishing line, hooks, lures, camping furniture, tents for winter fishing.

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

Step 4.We 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 website we can see two prices:

1. Low price for goods, minimum. But the store sets this amount without shipping costs; you will need to pick up the purchase yourself in the store. In addition, this price is valid for goods only upon pre-order, and the waiting time can be more than seven days.
2. The price for the same product is higher but the store will deliver it to the apartment itself, and 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 to personally appear at the point of delivery. 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 long and painstaking work, which must be maintained constantly, consists of the following actions:

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

The practitioner tells

How to convince someone to buy more

Vasily Baida,

General Director of INSKOM Solutions, Moscow

We are constantly faced with the desire of customers to reduce prices and optimize their costs, while large buyers, due to the large volume of orders, are trying to impose a minimum price on us. Since we work with large Western chains, our main argument in countering attempts to impose their own low price on us is our service: we have focused on the quality of supplies, their uninterrupted supply, and fulfilling orders on time. This allows us to argue reasonably against consumers understating our prices and sell goods on terms favorable to us, while the client agrees and is willing to pay more for our convenient and high-quality service and the guarantee that delivery deadlines will be strictly observed and his risks of losses due to problems suppliers are minimal or reduced to zero.

Method 1. Operate with facts, demonstrate potential clients your work history with customers and the positive results they achieved through working with you. Show your clients 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 weak spots in the customer’s business processes, clearly indicate this to him. Analyze how the leaders of the field in which your customer operates operate, make a comparison and recommend to your new clients any changes that can improve their business, optimize costs, and bring profit. Remember, the successful activity of the 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 buy not from companies, but, above all, from other people. If a client knows that your business is stable and 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 clients– sometimes it is easier to sell a product to a new consumer at a higher price than to sell the product to old customers at the same cost. Maintain a flexible pricing policy depending on who you work with. Rely on your employees, encourage them to find and attract new customers. For example, offer your 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 referred to you by an employee.

Information about the experts

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

Vasily Baida, General Director, INSCOM Solutions, Moscow. Graduated from Moscow State University of Economics, Statistics and Informatics (MESI). At L’Oreal, he led the direction of work with the Luxe and Drug networks. Since 2010 - General Director of INSCOM Solutions (INSCOM LLC). He is interested in rowing, boxing, and motorcycles.

Boris Vorontsov, Director of "Informant", Nizhny Novgorod. "Informant" is a competitive intelligence agency that specializes 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 countries near and far abroad.

For the first time we started talking seriously about competition only after the fall “ iron curtain", which was associated with a significant decrease in the competitiveness of enterprises. Since then, research in this area has been actively conducted, during which many factors of the competitiveness of economic entities have been revealed.

The concept and essence of competition

Competition is considered the center of gravity of the entire system of market activity, as well as a form of interaction between producers in relation to the formation of the price aspect, production volumes, as well as the general situation on the market. Undoubtedly, it is competition that speeds up the process of promoting goods and makes it possible to provide the market with products in full.

The process under consideration consists of competition between individual subjects market structure for the best conditions in terms of benefits for both production and sales of products. It is important to note that in a market economy such clashes are inevitable. This situation can be fully justified by the following factors:

• A large number of absolutely equal economic entities on the market.
• Their isolation in terms of carrying out their activities.
• Dependence of these entities on market conditions.
• Confrontation between subjects to satisfy customer demand.

Types of competition by nature of development

Today there are fundamentally different forms of the category under consideration. Thus, when using the first option, it is appropriate to change product prices in order to ensure maximum demand. When the presented process is reflected on the demand curve, one can observe that selling firms move along it, either reducing or increasing the price of their goods. But the winner is the entrepreneur who has all the costs of producing the product.

The intensity of price competition is primarily affected by interest rate, degree of economic risk, product differentiation, and limiting the power of sellers in the market.

It involves relegating the role of price to the background, while fundamentally other factors become the main component of the “battle”. Among them are the unique properties of the product, its reliability in technical terms, as well as high quality.

Why are price fights unprofitable today?

It is important to note that modern conditions market economy made price competition unprofitable, especially for small companies, because compared to Western giants they have insignificant financial resources, therefore not capable long period time to sell your goods at reduced prices. Thus, a price war can turn into a real struggle of financial attrition, which hits hard the most vulnerable parts of the industry, often already weakened by the crisis and endless non-payments.

In addition, the demands of modern consumers have become much higher compared to previous periods, which has resulted in a wide variety of products on the market, their high quality and overall attractiveness. And this is it non-price competition. It is important to note that it costs businesses much less than the price. The main thing here is the company’s interest and the search for interesting ideas.

The main forms of non-price competition include the following:

• Introduction of an innovative product to the market, called product differentiation. It can be passive in nature, when supply follows a change in effective demand, or active, involving the imposition of demand already modeled by entrepreneurs through forecasting, market conditions and expert information.
• involves improving the quality indicators and consumer properties of products, relevant in following cases: the company intends to expand the list of product properties, market segments for the sale of goods; the company seeks to increase its authority in the market or is trying to achieve entry into a larger market segment; the seller intends to improve consumer properties product.
• Differentiation of product sales channels, which should include types of sales and after-sales services. These actions are aimed solely at organizing the sale of the product by attracting new categories of consumers or encouraging them to re-purchase.

The following sets of methods inherent in the corresponding competitive actions of economic entities are non-price:

• Maintaining one’s own status in established sets of values, as well as entering new chains of similar values. In this case, companies seem to continue to compete around the product, however, it is not consumers who enter into relations with them, but counterparties, including partners in running a common business.

• , causing processes of influence and pressure on both direct (real) and indirect (perceived) competitors. This should include propaganda against direct competitors, collecting important (even confidential) information into one set, joining a competing company with the goal of suppressing it, and so on.
• Methods by which the company maintains and increases its own authority in society, which should include the establishment of individual standards of behavior with competitive companies, participation in non-commercial events, or the use of PR communications to improve the company’s image.

Non-price competition in practice

As it turned out, price and non-price competition have fundamental differences, which determine the nature of the behavior of one or another company in order to increase demand for its product. In previous chapters it was noted that in modern conditions the price category has been eclipsed non-price competition. Examples Such situations are quite numerous. So, any research involves first defining goals, then building a plan, analyzing data and, of course, summing up the results.

Let's say the central object of research is men's clothing. The responsibilities of a marketer include studying the relevant category of the population in relation to the main preferences in terms of wardrobe and other circumstances influencing the purchase (income, opinion of close relatives), after which tasks are formed, as a result of which the specialist finds out the main preferences of men - not an easy task, but the company that can carry out all the above operations competently and efficiently will certainly be the winner.

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Price competition occurs when competing firms use price policy as the main lever of competition. Moreover, it can be carried out either directly, openly, through a public statement about reducing prices for their products, or hidden, when the price reduction threshold is not subject to publicity. IN Lately price competition is increasingly giving way to non-price competition due to changes in the nature of the vast majority of markets and their transformation into buyer's markets.

Price competition involves selling goods or services at prices lower than those of competitors, due to a temporary decrease in profits. Thus, in order to win or retain customers, firms can use various types of discounts compared to the list price for different categories of buyers (for example, large firms that have a foothold in the market for some time may generally refuse to make a profit and, in order to block the invasion of new competitors, establish so-called limiting prices for its products, i.e. prices below the minimum point of the long-term average cost curve of a potential competitor.

Price competition occupies an important place in the trade of perfumes and cosmetics. Companies strive to offer consumers prices that are not only acceptable to them, but also, if possible, lower, even if only slightly, than competitors’ prices for similar products.

Price competition involves selling goods at lower prices than competitors. A price reduction is theoretically possible either by reducing production costs or by reducing profits. Small and medium-sized companies often agree to small profits to stay in the market. Large monopolies can afford to give up making profits altogether for some time in order to use cheap products to ruin their competitors and force them out of the market.

Price competition involves selling goods and services at prices that are lower than those of a competitor. A price reduction is possible either by reducing costs or by reducing profits, which only large firms can afford.

Price competition plays a secondary role in the textbook market. First, unlike most markets, in this case someone else chooses the product for the consumer.

Price competition comes in two forms.

Price competition can be started not only by a company with a dominant position in the market, but also by a small enterprise in order to survive in a competitive environment.

But price competition can also turn into price wars. By lowering the price slightly, one of the companies can attract the majority of buyers.

There is strong price competition among sellers.

Local small firms benefit from price competition, which, taking advantage of the fact that prices on the Norwegian market are 15 - 20% higher than in other European countries, provide customers with various types of discounts.

An example of price competition (Bertrand competition) with power restrictions is illustrated in Fig. 7.3. In the figure, D(p) is the demand curve. The two vertical lines represent the capacity of each firm. The third vertical line k k2 reflects the total capacity in the industry.

In the global market, intense competition among product manufacturers constantly exists, but in order for performance in foreign markets to be as successful as possible, it is necessary to constantly improve the competitiveness of domestic products. Using competition from foreign sellers when importing allows you to achieve the most favorable purchasing conditions.

Competition concept

Competition (from the Latin “to collide”) is the struggle of economic entities that are absolutely independent from each other for limited economic resources. It is an economic process in which enterprises acting on the market enter into agreements with each other. economic interaction, in order to ensure the most better opportunities sales of its products, while satisfying a wide variety of consumer needs.

The concept of competition is so voluminous that it cannot be fit into one universal definition that clearly expresses its essence. This is both a method of management and the special existence of capital when one of them competes with another.

There are 5 components of business competition:

• when potential market participants compete;
• existing players or participants in the market;
• market pressure from buyers to reduce prices;
• competition between surrogates of services or goods (for example, sellers of leather and leatherette);
• market pressure from suppliers to increase prices.

Competition as a catalyst for economic development

In competition, there is a main distinguishing feature - the property of commodity production, as well as the method of development. In addition, competition plays the role of a spontaneous regulator of all social production of goods and services, and as an ultimate goal, competition leads, on the one hand, to an aggravation market relations, and on the other hand, to a constant increase in the efficiency of production and economic activity.

There are two types of market competition - price and non-price. Both of these types have their own goals and methods of implementation, which differ significantly from each other.

Non-price competition uses higher reliability of the product than its competitors, more modern and attractive design, and many others as methods to achieve such goals. For example, many buyers prefer to overpay for a well-reputed foreign product than to buy an analog product of local production inexpensively and on favorable terms. Non-price methods of competition also include providing consumers with large packages of services, such as personnel training, payment of a down payment for the purchase of goods and others, for example, reduced metal consumption or pollution prevention environment. One of the methods to realize this is advertising, the role of which is modern world cannot be underestimated.

Use of illegal methods

Non-price competition often uses illegal methods, such as industrial espionage, to achieve its goals. Sometimes they lure specialists from other companies, promising higher wages, in order to take possession of some production secrets in the field of technology.

Illegal methods of competition also include the release of counterfeit goods, which are similar in appearance to genuine ones, but are much worse in quality.

Price competition

In the global economy, competition is usually divided into price and non-price.

As a rule, price competition is based on artificially reducing prices for any type of product. In this case, the method of price discrimination is often used, which is effective only when a particular product is sold at different prices, and such price differences cannot be justified by differences in production costs.

Price discrimination, as one of the types of price competition, occurs under three conditions:

1. When the seller is a monopolist or has a certain degree of monopoly power.
2. The seller distributes buyers into groups that differ in purchasing abilities.
3. The original buyer does not have the opportunity to resell the product or service received.

In most cases, price discrimination is used in the service sector (cleaning, legal services, hotel business, etc.), when providing services for the transportation of finished products; marketing of goods that cannot be redistributed from one market to another (this usually applies to perishable products).

Price competition strategies

Price competition comes from those distant times of market rivalry, when similar goods were sold at very different prices, and reducing their cost was the factor due to which the seller, as it were, distinguished his product from all those existing on the market, attracted the attention of the consumer to it and won the main market share as a result.

This does not mean that price competition does not apply in the market today. It certainly exists, but it always has various shapes. Open competition can only exist if the moment has not come when the company has not exhausted its reserves for reducing production and, accordingly, increasing profits.

But when a certain price equilibrium is established, any attempts by manufacturing firms to reduce prices entail a reduction in the cost of their products on the part of other manufacturers. Thus, some of them notice a gradual decline in production, which eventually leads to complete bankruptcy. And this, in turn, opens the way to the market for other companies.

Monopolies as an example of competition

In most cases, price competition as a method of competition itself is used by so-called outsider firms in their fight against monopolies, which they have neither the strength nor the ability to fight with other methods.

Price methods of competition are also used to penetrate markets with the offer of new, previously unproduced goods, which is often not neglected by monopolies in those areas where the advantage is not on their side.

An example of price competition is monopolies, which have the ability to control the production and sale of one or more varieties of goods or services. Such enterprises are endowed with a lot of privileges in the markets; they are structures in which there is no competition.

Thus, during direct price competition, manufacturing firms try by all available methods to communicate price reductions for new, as well as for services and goods already available on the market. It is important to understand that the modern consumer big choice.