Forms and methods of non-price competition: the introduction of new products, sales promotion, advertising and public relations. The role of advertising in shaping consumer product demand. Functions of advertising as a key element of the market economy.
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Tallinn University of Technology
School of Economics and Business Administration
Department of Finance and Economics
Chair of Economic Theory
Supervisor: Tatjana Polajeva
Table of Contents
- non price competition advertising
- 1. The essence of non-price competition
- 1.1 Methods of non-price competition
- 1.2 Forms of manifestation of non-price competition
- 2. Non-price competition on the example of "exclusive" company in Saint Petersburg
- 2.1 ISO9000 Certification
Relevance of the chosen problem is that the market through three mechanisms - competition, supply and demand, pricing - leads the economic system in motion and gives it incentives for further development. Market forces of economic entities to engage in a competitive relationship and constantly supports competition between them. Action market mechanism stimulates entrepreneurs continuously develop new products.
Through market pricing mechanism continuously provides business information on changes in the market, the emergence of new conditions, etc. It affects all market participants, forcing weak entrepreneurs and rewarding the strongest using various methods of competition. Competition is effective mechanisms for competition in the market. It acts as a coercive power, forcing entrepreneurs to fight for an increase in return on capital by seeking new forms and methods of production, use of new technologies, new ways of organizing, managing the provision of new services. The purpose of the study - to explore the essence of non-price competition.
More effective and more modern form of competition is to fight for the quality of goods offered in the market. Placing on the market of higher quality products or new use-value complicates the response by the competitor, because " shaping " the quality goes a long cycle, starting with the accumulation of economic, scientific and technical information. As an example, the fact that the well-known Japanese company "SONY" VCR has been developing simultaneously with 10 competing destinations.
Important role of pre-and after-sales service plays for the buyer, because manufacturers need a permanent presence in the area of customer service. Pre-delivery service includes meet the demands of the terms of delivery: reduced regularity, regular deliveries. After-sales service, the creation of various service centers for the product purchased, including the provision of spare parts, repairs, etc.
Due to the great influence on the public media, press advertising is the most important method of competitive struggle, because through advertising can be a certain way to form an opinion of consumers about a particular product both for the better and for the worse
But the main advantage of non-price competition - this is the minimum cost spent to improve product quality and to create high-quality advertising company requires fewer resources than maintaining exhausting " price war "
The aim of the course work was to study the methods of non-price competition. For this purpose, the disclosure of the following tasks:
1) Consider the theoretical foundations of non-price competition:
- The essence of non-price competition;
- Product differentiation, its improvement and diversity;
- Methods of price competition;
2) To study the features of advertising and packaging, as factors of non-price competition
- Features of advertising;
- The impact of advertising on sales of products;
- Features of the package;
- Empirical evidence
1. The essence of non-price competition
Non-price competition - competition method, which is based on no price advantage over competitors, and achieve a higher quality, technical level of technological excellence, with greater reliability, longer life and other more sophisticated consumer properties. Mainly improving product quality and conditions for its sale holds Non-price competition.
Improved quality can be in two main areas
1) Improving the technical characteristics of the goods;
2) Improving the adaptability to the needs of consumer goods. (service)
Non-price competition by improving the quality of products is called competition for the product. This kind of competition is based on the desire to capture some of the industry market through the issuance of new products or service that are either fundamentally different from the old model, or represent its upgraded version. Competition based on improving quality, is contradictory. On the one hand, is a way to improve the quality of hidden price cuts and market expansion on the other - the "quality" - a subjective assessment, which opens up the possibility of falsification of quality through advertising and beautiful packaging.
Non-price competition by improving the marketing of products called competition in sales conditions. This kind of competition is based on improving the service of customer service. Here is the effect on the consumer through advertising improve trade the establishment of service benefits buyers after the purchase of the goods, that is, during its operation.
Non-price competition is conducted by reducing costs, improving product and service quality, reliability, better payment terms, warranty and service, improved marketing techniques.
The more unique product offering, from the point of view of consumers, the more marketing freedom in setting prices higher than those of competing products. Each of the companies acting in the market tends to at least maintain the market share, which it occupies. Basic techniques are required for this competition - the price, the technical level and other quality indicators of the goods, delivery terms payment terms, scope and timing guarantees, and quality of service advertising and other activities.
Currently, many companies prefer to improve consumer properties of their product while maintaining or even some increase sales prices. With appropriate advertising such "hidden" discount from the price of goods is usually a positive reaction from the modern consumer, which is so often associated with low price poor quality product.
Capturing market penetration using it based on the development of a new branded product or exclusion of competitors offering similar products also occurs in non-price competition. In the world of success is determined by price competition (especially in Europe, North America, South - East Asia) technical level, product quality and reliability, proven certification in conventional centers, level of service and after-sales service, rather than low prices.
One of the challenges of the modern theory and practice of organizing the competitive activities of the participants of the market process is to establish the causes and diagnosis of qualitative and quantitative transition conditions of price competition in non-price competition.
Non-price competition raises a range of important problems of the market. Among them interbranch mechanism of profits in the form of input-output problems, overcapacity, the impact on sales of non-price factors preferences and choices, competitiveness, cost of consumption.
Non-price competition - competition method, which is based on no price advantage over competitors, and achieve a higher quality, technical level of technological excellence, with greater reliability, longer life and other more sophisticated consumer properties.
Significant role in non-price competition play: design, packaging, subsequent maintenance, and advertising
Non-price competition minimizes price as a factor in consumer demand, allocating goods or services through the promotion packing, delivery, service, availability, and other marketing factors.
For example, the company is trying to attract more potential buyers beautiful packaging or offer the consumer more favorable compared to the competitor conditions. The most important element of price competition is advertising. Advertising can help the company increase its market share and attract consumers.
When price competition sellers move consumer demand curves, emphasizing the distinctive features of its products. This allows the company to increase sales at a given price or sell at the initial amount higher.
The risk in this case due to the fact that consumers cannot be regarded as a dealer better than the competition. In this case they will buy cheaper goods, which, in their view, similar to more expensive. Firm based on price competition should reduce prices to increase sales.
Competing products is an important means of implementing technical innovations and improvements to the product over time. The improvement of the product may be growing in two different senses. First, a successful product improvement of one firm or obliges competitors to imitate, if they can do it, surpass temporary market advantage from this company, otherwise they cannot avoid losses. Second, profits derived from the successful improvement of the product may be used to finance its further improvement. However, again there are significant criticisms of the product changes that may occur in conditions of monopolistic competition. Critics point out that many of the changes in the product are more apparent than real. They represent minor temporary changes in the product, which does not increase its durability, effectiveness or usefulness. More exotic container, packaging or bright " guidance shine " often constitute the main lines of product changes. It is also proved that, especially in the case of consumer durables goods and a limited period of use may be modified by the principle of " planned obsolescence " where firms improves, your product exactly to the extent necessary in order to make the average buyer to feel dissatisfaction with last year's model.
1.1 Methods of non-price competition
Non-price methods intended to change the properties of the product giving it a qualitatively new features, creating new products to meet the same needs, offer products that did not exist on the market, improving the range of services, related products (product demonstration, longer warranty repairs , etc.) . An important factor is price competition efficiency and minimize the delivery time, which can be observed in terms of delivery specified desired product quality in certain contractual terms of place and time, subject to the minimum total costs of transporting products. It is impossible not to allocate such a factor price competition as the creation of a powerful sales network and service personnel. To include non-price competitive group of methods of action.
The first group - methods to ensure a competitive advantage by changing the organization of the better characteristics of a variety of consumer goods and services, in order to increase customer value:
- The introduction of new products (product differentiation);
- The introduction of products that have new consumer properties, improved quality, more advanced design, more beautiful packaging (differentiation of consumer properties of goods)
The second kind of differentiation will apply when:
- The organization aims to expand its list of consumer properties of goods
- The organization is trying to expand the list of market segments of manufactured goods
- The organization intends to achieve recognition on a relatively small sector of the market due to the diversity of products offered
- Introduction of new forms of corrupt and after-sales service to attract new categories of consumers, encourage more frequent use of goods and one-time purchase more goods
The second group of methods of sales promotion. These short-term measures of monetary or material nature to encourage the purchase of goods.
Sales promotion is a multi-pronged focus. Target selection depends on the subject of the upcoming impact - the consumer or reseller.
The consumer has the greatest importance, and all the marketing policy is reduced to the effects on the consumer. The goal of stimulating in this case can be reduced to increase the number of customers or increase the quantity of goods purchased by the same buyer. By means of sales promotion for buyers include: samples per sample bonuses, lottery, markdowns, trade discount, coupons, sales, games and competitions, clubs consumers ' label event. " Reseller, as a natural link between producer and consumer, is a specific object of incentive in this case performs regulatory functions. In this case the goal of stimulating can be directed to:
- Give product a certain image, to make it easily recognizable;
- Increase the amount of goods entering the distribution network;
Means of sales promotion for resellers are premiums and gifts, shopping premiums, reimbursement of expenses for advertising, prizes, exhibition sales, souvenirs, and shopping brochure.
Organization should constantly compare and analyze alternatives sell his goods, to revise prices and discounts depending on changes in the market.
The third group of methods of advertising and public relations.
Advertising - is disseminated in any form by any means information about the natural or legal persons, goods, ideas and initiatives, which is designed for a specific group of people and is intended to form or maintain an interest in the natural or legal persons, goods, ideas and initiatives and facilitate sale of goods, ideas and initiatives.
Television advertising is the most massive and most expensive form of advertising. Currently in Russia and one advertising campaign will not be completed without advertising on TV.
Radio advertising is an essential part of our everyday life. However, its main difficulty lies in the fact that quite difficult to separate from the audience of potential buyers and get them to listen to exactly the program, under which is advertising. Can affect feelings with appropriate tunes noises and voices that portray exciting mental images. Radio uses three main instruments for transmitting messages:
- Voice helps listeners to imagine the characters;
- Music conducive to better memorization;
- Sound effects are used to transfer the situation in which the action takes place.
Success of advertising in newspapers and magazines is determined to do this edition, a good text, catchy design text , a good placement of text on the strip Publishing , correct timing and frequency of the publication . In order to choose the most appropriate publication is necessary to compile a list of all the newspapers and other periodicals, capable of achieving the desired group of potential buyers.
The main function of the outdoor advertising is reinforcement and the addition of advertising placed in other media.
In outdoor advertising plays a major role repetition factor so the budget must be drawn up on the basis of the need to purchase specially selected places that regularly come to the attention of many people.
Before engaging in planning advertising should identify consumers' demands and its relevance to the product evaluate the level of competition in the market, that is, to conduct market research. Modern marketing recommends complex and use different types of advertising media. Complexity must ensure maximum coverage of the selected segment. Each potential customer needs to provide the necessary information about buying the product. The resulting efficiency of the sales of goods indicates optimal saturation advertising. Saturation advertising - the volume of all promotional activities in a given period of time in the selected market sector. The value of this volume is estimated to cost promotions. Efficiency is defined by the ratio of sales of products (total requests for products to saturation promotional activities during the reporting period).
Each type of product in a particular market has its optimum saturation, ie the effectiveness of advertising has special laws. Change in volume of products (advertising effectiveness) is directly dependent on the substance and used advertising media. When insufficient saturation advertising costs are rising faster than effectiveness. Funds invested in promotional activities, are used most effectively when the saturation advertising reaches an optimal level.
A further increase in costs does not lead to the desired results: the effect of sales remains at an optimum level, the increase in advertising spending decreases expected profit. Too limited budget for advertising products are sold slowly, the company makes a loss, the effect of " anti-advertising ".
Analysis enables businesses to develop recommendations for the selection of the most profitable types of promotional activities and encourage advertising in accordance with a certain type of product and the specific market for a given period of time. These patterns for different kinds of goods are almost identical.
Thus, the income from the sale of a product is largely determined by advertising and its ability to convince the buyer to make a choice in favor of the proposed.
But along with the methods of good non-price competition, there are other, less legitimate methods of competition: The main methods are:
- Economic (industrial espionage)
- Forgery of competitors' products
- Bribery and blackmail
- Consumer fraud
- Manipulation of business reporting
- Currency manipulation
- Concealment of defects, etc.
1.2 Forms of manifestation of non-price competition
According to foreign scientists, products from producer to consumer makes its way, which can be represented by the following formula. Product distribution research project + salespeople + moving + advertising=sale. Thus, we see that the advertising process completes sale ability.
Leading role in shaping consumer demand plays advertising of any product. Advertising in a different form, and primarily on the product packaging, helps to achieve the main goal by persuading consumers to continue to use the product and test the product in a new application, as well as motivations of those who do not use the product, buy it .
When the firm produced a new product, or additional modified old advertising helps us in searching for and attracting new customers. At the same time she is trying to influence the existing customers that they continue to buy the products of the company. Advertising should be aimed at attracting customers and in order to replace those lost as a result of firm competition.
Advertising is customer activity in three ways: it can encourage them to direct action (the buyer asked to come in and buy immediately, send the order, etc.), an indirect action (constantly reminding and encouraging brand only buy this product) combination of the two types of asking the buyer to take a step in the direction of purchase, but do not require to do so immediately.
The ads use a few basic tools: television, radio, newspapers, magazines, as well as outdoor advertising media: signs, stands, showcases, neon signs. Special role-plays by advertising in the form of packaging, so the main burden carries advertising, of course packing.
The purpose of advertising firms operating under monopolistic competition, the firm hopes to increase its market share and increase customer loyalty towards it for its differentiated product. Translated into specific terms, this means that the firm hopes that advertising will move its demand curve to the right and at the same time reduce its price elasticity.
Advertising critics point to the fact that its main purpose - to persuade rather than inform. Not many would argue that television advertising of beer, which focuses on the dispute on the "less is poured - more sensations " tells consumers a lot of useful information. Competitive advertising is based on the often misleading and ridiculous statements that lead to confusion and often affect consumers rather than enlighten them. In fact, advertising may well be in some cases to convince consumers to pay high prices for much lauded, but the worst quality products, abandoning the best quality, but not advertising products sold at lower prices;
It is alleged that the advertisement promotes monopoly. On the one hand extensive advertising creates financial barriers to entry and thus enhances market power, which firms already possess. Moreover, developing a commitment to a certain brand name, consumers are becoming less sensitive to lower the prices of their competitors, thereby increasing monopoly power, which has a firm that advertises its product.
Advertising - one of the main elements of a market economy and non-price competition. It performs the following tasks:
a) Inform the consumer of a product, and it costs the advertiser economically viable;
b) Increasing the demand for goods and increases the pressure to its production, which in turn regulates the prices. Characterized by a situation where the manufacturer, to the minimal profits through advertising significantly increases the volume of products sold, thus speeding up the turnover of their capital and get more profit;
c) Encourage competition, because it sets standards for product characteristics that most attract the consumer
g) Helps the media to remain independent, bringing them some income
All this testifies to the fact that advertising - an integral part of the market process. Many experts believe that the packaging can and should say a lot about the product.
Good packaging facilitates the sale. Product packaging is a "silent salesman". Trading on the method of self-service and open display of goods require that the package itself contributed to selling more than the seller and the salesman tried to convince the retailer to the truth of this proposition. Packaging should attract attention, stimulate interest, create desire and encourage customers to buy. It must "sell" not only the consumer, but also the dealer that the goods were attractive, could be nicely placed on the shelves, took place for the price indication, well maintained transportation, storage and long-term use.
Good packaging informs. She - the main means of transmission of information to satisfy the consumer and call on his part repeat purchase. It should give the client at least the information that he needed for the proper use of the product. For example, if a product - clothes, it must have a label containing instructions for washing, cleaning and ironing, and also include a description of fibers or materials report that sheds whether the material and provide general suggestions for the upkeep.
Packaging should be easily identifiable, to create such a strong impression about the brand to customers almost automatically selected product.
In some industries with strong competition package is specially to attract the attention of buyers more than the product itself. In the food industry, for example, manufacturers often use dual-use package. They put their goods in vessels that are used for a long time after use content. For example, a housewife buys honey certain kind not only because of the content, but also because of the attractive glass in which it is sold.
If on the market there is a new product, for its effective marketing package to stand out, to reflect the novelty, in other words, to emphasize the feature of this product. Thus, driven by sales of goods packaging is advertising to attract buyers.
2. Non-price competition on the example of "exclusive" company in Saint Petersburg
"Exclusive" company is a large company, which sells tires, disks (cars and trucks), does warranty maintenance, service and makes car engine repair service. 500 employees work in this company. There are 12 spots all over the Saint Petersburg. Some of them even work 24h.
Market of tires and disks is very high, so the competition always exists. All the competitors don't have such quality service and the variety of products, that's what helps "Exclusive" to survive in such a big megapolis. Company is always expending by making more trade spots and hiring more quality specialist. All the workers are professionally trained to improve their quality, when new introduction of unique services is made. Comparing with the other companies "exclusive" tries to capture the market and get more potential customers by satisfying their desires and wants. New rules and innovations are always made by the head of directors (packaging, services, and warranty maintenance).
Non-price promotion ("Exclusive")
- Best service
- Better service and professionalism of staff
- Extras client: delay, delivery
- Creating additional value of the goods
- Innovative packaging
- Warranty maintenance
If managers need to quickly promote a product on the market, they can do so without sacrificing the benchmark or market perception of value. One of the common practices - give consumers free samples or provide a product small group of customers who have influence on the market. Other - provide consumers with free trial period for testing. Both methods accelerate the market penetration of the product without compromising its price points .
2.1 ISO9000 Certification
So you want to buy some product and see that having the ISO 9000 certification makes it. What does this mean for you as a buyer? Does it have any real meaning and is just another publicity stunt to persuade you to buy?
So, in a nutshell, ISO 9000 - a standard quality system. Exact - one of the existing standards of quality systems that get currently the most widespread.
Standards for quality systems were not always. Before were taken first such standards, almost all transactions worth more than a certain amount (thousands of dollars) is entered into only after the consumer himself inspected the plant supplier and became convinced that the supplier is able to produce really high-quality products. Supplier had to withstand a lot of checks from different consumers whose demands sometimes differed significantly from each other, and often contradict each other. Problems were and checking: constant traveling, spending time agonizing search for compromises, etc. However, all this was a necessary preliminary work before the conclusion of the contract - the consumer had his eyes to make sure that the goods will be delivered to him the proper quality.
All this was the presupposition that, in order to simplify the procedure for pre-contract relationships have developed specific standards, which spelled out the minimum requirements for the supplier to be met by the overwhelming majority of consumers. Later these standards today received a familiar name - the quality system standards.
With the emergence of standards for quality systems appeared universal measure of comparison in order to assess which suppliers meet the established minimum requirements and which are not. And even if a consumer has exhibited higher requirements than those provided standard, he would rather prefer to talk to the supplier, who already had a certificate for a standard quality system than anyone else. Those consumers whose demands remain within the standard of quality systems at once could make deals with certified without additional checks.
So, what is" quality system " and why its presence is the manufacturer makes such a difference to the consumer? All the matter is that, in accordance with the system of quality manufacturer organizes its production in a manner that ensures: decline in the share of marriage in the products, the lack of spending on the adaptation, which leads in turn to a decrease in the cost of production (average - 25%) and an increase in trust from the buyers;
Optimization of traffic flows within the production process and reduce the shelf life of blanks and finished goods inventories, which reduces transportation costs and storage costs and, consequently, also in turn, leads to a decrease in the cost of production (average - 25%); use as a means of marketing is not sales, but as a way of knowing what qualities must have products to be competitive.
Thus, the consumer receives from a supplier with a certificate of ISO 9000 better products than from its competitors (at similar prices) or more inexpensive (under a similar capacity) . In addition, of course, products supplier using certified quality system in its production, has a high consumer, because during its production necessarily take into account the views of a large number of consumers.
It is clear that the introduction of quality systems at the supplier is not a local nature. Just the opposite - the certificate ISO 9000 says that the whole structure of the company and its management in general rebuilt so that the output to ensure high quality finished products.
Now that we have a sufficient understanding, which means that the certificate ISO 9000 Manufacturer general, we can consider what the benefits to the buyer who buys such a product.
Thus, buying a product made by the manufacturer that has been certified to ISO 9000 , the buyer has a high degree of assurance that he buys quality solid product that will last him a long time .
Does this mean that any other manufacturer that does not have such a certificate produces lower quality products? Probably not. Lack of a certificate only indicates that the manufacturer or no quality system in its production or the quality system is not effective enough. Otherwise, he would have gone and also received a certificate. The rest - the case of individual choice of the buyer. Some people prefer a reliable and high quality products some prefer to take risks.
ISO benefits (http://www.iso.org/iso/home/standards/benefitsofstandards.htm)
ISO International Standards ensure that products and services are safe, reliable and of good quality. For business, they are strategic tools that reduce costs by minimizing waste and errors, and increasing productivity. They help companies to access new markets, level the playing field for developing countries and facilitate free and fair global trade.
International Standards are strategic tools and guidelines to help companies tackle some of the most demanding challenges of modern business. They ensure that business operations are as efficient as possible, increase productivity and help companies access new markets.
• Cost savings - International Standards help optimize operations and therefore improve the bottom line
• Enhanced customer satisfaction - International Standards help improve quality, enhance customer satisfaction and increase sales
• Access to new markets - International Standards help prevent trade barriers and open up global markets
• Increased market share - International Standards help increase productivity and competitive advantage
• Environmental benefits - International Standards help reduce negative impacts on the environment
The analysis of a non-price competition has shown that the most important methods of non-price competition are advertising, quality, packaging, product differentiation, unique quality service, the warranty maintenance and the excellent customer service. Non-price competition is the method that is based on no price advantage over competitors, and achieves a higher quality technical level of technological excellence, with greater reliability, longer life and other more sophisticated consumer properties.
The most significant aspect of the non-price competition is that the companies try to compete on other methods except price. This gives the main idea that the companies should look at the other aspects of the business such as quality, advertising and customer relationships in order to stay competitive in the market.
Moreover, non-price competition method is implied to enforce the different methods of product differentiation. Differentiation means that the product company has properties that distinguish it from other similar competitor products, which significantly expands consumer choice.
Also, the excellent quality maintenance plays the crucial role in the attraction of the consumers' attention to the product or the service that a company offers.
Below there are the most significant methods of non-competition strategies such as:
Methods of non-price competition are:
1) Attractive design and advertising products (packaging, style, brand name, etc.) .
2) The best selling system and after-sales service (hire purchase, warranty and service, delivery to your home, etc.);
3) Provision of technical excellence, quality and reliability of the products;
4) Excellent9 quality EX:(ISO 9000)
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