Non-price competition is a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship" (McConnell-Brue, 2002, p. 43.7-43.8). The firm can also distinguish its product offering through quality of service, extensive distribution, customer focus, or any sustainable competitive advantage other than price. It can be contrasted with price competition, which is where a company tries to distinguish its product or service from competing products on the basis of low price. 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.
Firms will engage in non-price competition, in spite of the additional costs involved, because it is usually more profitable than selling for a lower price, and avoids the risk of a price war.
Although any company can use a non-price competition strategy, it is most common among oligopolies and monopolistic competition, because firms can be extremely competitive. Businesses can also decide to compete against each other in the form of non-price competition such as advertising and product development. Oligopolistic business normally do not engage in price competition as this usually leads to a decrease in the profit businesses can make in that specific market.
Non-price competition is a key strategy in a growing number of marketplaces (oDesk, TaskRabbit, Fiverr, AirBnB, mechanical turk, etc) whose sellers offer their Service as a product, and where the price differences are virtually negligible when compared to other sellers of similar productized services on the same market places. They tend to distinguish themselves in terms of quality, delivery time (speed), and customer satisfaction, among other things.
- Brue, Stanleye L., and McConnell, Campbell R. Economics–Principles, Problems and Policies (15th edition). Boston: Irvin/McGraw-Hill, 2002.
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