Difference Between Price and Non-Price Competition

From an economist's perspective, the knowledge of demand and supply plays a vital role in how market prices turn out and that is received by consumers. From an angle, when the price of a commodity is high, consequentially, it is assumed that the quality of such goods is high, yet when the price is low, the quality is perceived to correspond accordingly. However, this does not erase the propensity that the market value of a commodity does not reflect its product value.

Price has been held to sometimes determine the consumer's comparative capacity with other alternatives. It further plays a pivotal role in brand management and patronage. When determining the pricing process of a brand, producers would usually construe the pricing approach contingent on the cost of production or its competitor’s value for similar products.

Applying this, the implication is usually that the price range can be either lower or higher, based on varying determining factors. These factors in the existence of a price war.

In the economic sphere, competitive strategies are prevalent that of consistent but firms increase or decrease prices based on diverse reasons including competitive trends or its future alignments in the customer market. This brings the subject of price and non-price competition.

Price Competition

Pricing is one of the many ways through which producers bridge the financial margin between production and consumers. Practically, when pricing is spoken, it is generally in the light of an essential mechanism from which a brand can either thrive or collapse.

When considering price competition, the economist wills from the frame of both the producers and the customers. When a consumer sees price completion, it is from the perspective based on the individual evaluation of similar goods with diverse brands, which of them is cheaper.

However, when this concept is seen from a producer's viewpoint, competition is driven by an evaluation between the prices of a commodity as compared to its competition through a method. It is a producer's medium of making a profit by cutting down costs or pricing. Subsequently, the business owner cuts the price below the competition.

When cutting the price to below the competition, the producers aim to create a market presence that would drive up the sales of such commodities through the pathway of lower pricing. Yet, to prevent the loss, the business owner usually cuts costs and extinguishes product services. This is done through the absence of advertising, reduction in credit alongside the suspension of delivery services. The effectiveness of the price competition strategy is only relevant in a significant aspect of the market environment where the pricing is sensitive to buyers and the competition.

Non-Price Competition

Non-price competition in contrast with its alternative is a market concept whereby a business distinguishes its services with factors other than pricing. This could be said to be a response to a competitor's strategy of low pricing for similar brands.

Businesses who engage in such practices have the innate knowledge that it is more profitable to compete based on the quality of the brand that risk the issuance of marginal loss in the market.

This practice is most common among businesses where its few firms dominate the market (oligopoly) or businesses where competitors are almost non-existent (monopoly).

Generally, the attributes non-price competition implements from the quality of product to brand promotion and advertising. Following these are product designs, coupons, special offers, discounts, distinct selling points, location of service, employment of the best workers, customer service, etc. Hence, they focus on the quality of the product as opposed to the price of the commodity.

In practice, a non-price competition affords its producers to concentrate on the quality and features of the goods rather than its pricing, thereby aiming to improve patronage through brand quality.

Therefore, the question non-price competition seeks to answer is not which is cheapest but which is best. For instance, in choosing a restaurant, the constitution of needs is not of whether which food is cheapest or which is not.

Usually, it is of which restaurant serves the best quality of food or sometimes customer service or location.

Differences between Price and Non-Price Competition

• Firstly, while price competition is distinguished based on price, non-price competition is determined based on product quality.

• Likewise, non-price competition thrives in the sphere of oligopolies and monopolies. Price competition, on the other hand, acts in a large market with a plethora of competitors producing the same products.

• In price competition, there is the propensity of a price war. Price war brought by a producer's misunderstanding of the conditions of the market while reducing the price of the commodity. Economics has defined it as when a business cuts price, believing in its capacity to market share, without evaluating its cost advantage. However, this is uncommon in non-price competition.

• Also in non-price competition, the quality of the product is generally increased and this might influence its brand promotion when considered for quality. In contrast, price competition features a low or absence of an increase in product quality. For instance, the quality of a brand value of a Rolex wristwatch cannot be compared with a brand as G-shock.

• As a result of the nature pricing of products in price competition based on competitors and market trends, there to be inconsistent pricing mechanisms, which leads to fluctuations in the market. On the other hand, a non-price competition maintains a consistent pricing system that does not waver unless in the case of a new product.

Market control could be said to become a driver for how much both the producers/business owners and the consumers are likely to gain from it. Notwithstanding, when the market is determined with pricing, it retains or loses its control.

Viewing this from the standpoint of an economist, price and non-price competition are joint terms, which can co-exist in the same business. It can, therefore, be applied to drive the sale of one kind of product while improving the brand quality of another. Yet, this is only practicable among firms that produce different kinds of products.