A decrease in petrol price will lead to more frequent use of cars that will increase the demand for petrol and engine oil, its complements. Instead of focusing so much on price via advertising — though it may be brought up every now and then — the company will focus more on how its product is superior and why spending more on it will be a better investment. If the market is expanding rapidly, customers may be compelled to purchase based on other factors than price, simply because the supply of goods is not keeping up with demand. These determinants will alter the demand for goods and services, but only within certain acceptable price ranges. Thus, an expected constriction in the supply of rubber might increase the demand for tires now.
Sellers can use advertising, product differentiation, product quality, customer service, and so forth to create such strong brand images that buyers have a strong preference for their goods. They generally set a same or low price of a product than that of the competitors to gain the market share. In general, nonprice competition means marketing a company's brand and quality of products as opposed to lower prices. Generally, the prices are changed to cover the costs or increase the demand. For instance, if consumers no longer see a clothing brand as fashionable, the manufacturer may not be able to continue charging high prices for its products. If the product is inferior, then this strategy may be ineffective, because consumers generally expect a better product or service when they pay more money.
During a particular season say a rainy season there tend to have higher demand for umbrellas, raincoats as compared to other times during the year. Product Differentiation Not all consumers are the same. For this reason, a number of producers compete by manufacturing a perception of high quality with their brands. Thus, if there is an economic boom, someone is more likely to buy, irrespective of price. For example, if there is an increase in the natural rubber then there will then be a lower demand for synthetic rubber, its substitute.
Markets consist of men and women from diverse age, ethnic and economic groups. However, the long-term sustainability of such an approach may be difficult because, as such brand advantages arise through consumer trends, consumer trends may also lead to their demise. This commonly is accomplished through discounts, coupons and similar measures, and the advertising typically will state that the product is one of the most affordable on the market. Such a strategy can prove effective at stealing business from competitors, but it can also backfire, because it can cause the company to alienate its existing consumers, who may be knowingly choosing the existing design over other products with different designs specifically because it appeals to their tastes. . If people expect the price of product X to increase, there will be more demand for that product now.
However, trying to offer a lower price than a competitor is not the only way of competing. The non-pricing strategy occurs in many markets but tends to be most common in an oligopolistic market, or one with few competitors. Other methods can prove even more effective for firms, though they can sometimes have downsides as well. A company may seek an advantage over another by marketing a product's longevity, convenience and workmanship over comparable products. In this way, if a firm can figure out how to produce an item at a cost comparable to what its competitor charges but make it of higher quality, that firm may be able to steal the market from its competitor. In price competition, the marketers develop different price strategies to beat the competition. The need for goods varies by time of year; thus, there is a strong demand for lawn mowers in the Spring, but not in the Fall.
This allows some companies to charge higher prices for seemingly identical products because consumers see value in the brand itself. A change in the proportions of the population in different age ranges can alter demand in favor of those groups increasing in size and vice versa. Changes in the determinants of demand will cause the shift of the demand curve. Advertising usually is quite clever in this field, because the company typically cannot win on the price battlefield and, thus, needs strong advertising to get sales. The demand for these products does not shift even if their prices increase. If the company can distinguish itself from the many competitors with superior quality and advertising, then this makes the strategy even more viable in a large market. Multilevel marketing is one way in which firms rapidly build their consumer base.
Perception and Branding In some cases, little possibility of quality differentiation exists between two products. Consumer expectations of future prices and income Consumer expectation is important to determine changes in demand. Sales Structure When two firms are competing with similar products, one may be able to enjoy more market share and a deeper level of penetration due to a more effective and aggressive sales structure. Buyers income If income of the buyers increases, there will be an increase in the demand for goods and services. With a non-pricing strategy, price goes untouched, forcing companies to use other methods to attract consumers. These factors are important, because they can change the number of units sold of products and services, irrespective of their prices.
Thus, the marketers focus on these factors to increase the sale of products. However, a marketer who is competing on non-price basis cannot ignore the prices set by the competitors as price remains a significant marketing element. A company normally does not have to worry about its product costing more if its advertising and product are effective enough. If the amount of available buyer income changes, it alters their propensity to purchase. For instance, Coca-Cola and Pepsi are close competitors, thus, they often engage in price wars. Thus, in case of non-price competition, the marketers try to promote the product by exhibiting its distinguishing features. In non-price competition, customers cannot be easily lured by lower prices as their preferences are focused on various factors, such as features, quality, service, and promotion.
Prices of related goods Prices of related goods also affect demand. Newer sales tactics include social media posts, direct sales through manufacturers rather than stores and efficient forms of advertising online. However, a problem with this approach is that it may take some time for consumers to realize any difference in quality. They often do so by cutting costs whenever they can, which allows them to pass the savings on to customers in the form of lower prices. Such groups tend to gravitate toward particular products as a bloc.
At the same time, it most commonly is used when there are few competitors. The non-pricing strategy can be quite effective at garnering sales, because many consumers value quality over cost, especially if the product or service really delivers on quality. For example, if non-price determinants are driving increased demand, but prices are very high, it is likely that buyers will be driven to look at substitute products. Thus, a change in the price of popcorn in a movie theatre could impact the demand for movies, as could the price of nearby parking. For instance, customers prefer buying expensive luxury products for gaining status in the society. By offering a range of similar products geared toward different market sectors, firms can expand their market base. Most companies compete with a pricing strategy, which involves adjusting and changing the price to get more sales.