Non-Price Competition: What Is Non-Price Competition?

Non-price competition is a marketing strategy that relies on product differentiation and sustainable competitive advantages instead of lower prices. In economic terms, it’s considered a form of imperfect competition because perfect competition involves competitive pricing strategies that cut costs to increase market share. Non-price competition typically occurs within an oligopoly, a market structure in which only a few companies control the majority of the market power, or a monopoly. Instead of engaging in price wars with their competitors, companies that rely on non-price competition use promotional expenditures such as marketing campaigns, brand management costs, advertising, sales staff, sales promotions, free gifts, and free delivery services.

Consider several examples of non-price competition.

1. 1. Quality: Non-price competitors often rely on the quality of the products they’re selling in order to differentiate themselves from the rest of the market. Higher-quality workmanship often means higher prices, but consumers may forgive high prices if they know they’re getting the best product available on the market.
2. 2. Innovation and adaptability: New product development is crucial for keeping non-price competitors at the forefront of the market. Consumer tastes, preferences, and needs are constantly changing. Businesses focusing on non-price competition strategies consistently roll out new product features and can quickly pivot to new demographics to shape their demand curve.
3. 3. Customer service: Reputation is everything, and what a consumer associates with a given brand name can make or break their loyalty. Companies operating a non-price competition strategy should focus on customer satisfaction to increase brand loyalty. After-sales service—such as extended warranties, free repairs, or complimentary consultations—is often an element of non-price competition strategies.
4. 4. Rewards: Loyalty cards, free delivery, and free gifts are all promotional expenditures that can incentivize consumers to pay a higher price. A delivery service that can offer free next-day delivery can usually demand a higher price if their competitors don’t offer the same service.
5. 5. Sales tactics: Non-price competitors rely on advertising unique selling points and sales promotions across marketing channels, including social media posts, email marketing, and commercial advertisements.

Non-price competition strategies are useful for companies that have a great deal of market control, but they can also mislead consumers. For instance, non-price competitive strategies might give the appearance of a competitive market, when in reality oligopolistic companies depend on one another to keep their prices high. So while marketing campaigns may suggest that one company’s product is superior to their competitor’s, the true nature of the product quality remains ambiguous. Whereas a high or low price is often a reliable indicator of product quality, non-price competition strategies make it harder for consumers to decipher whether or not one brand is better than another.

Get the MasterClass Annual Membership for exclusive access to video lessons taught by business luminaries, including Bob Iger, Chris Voss, Robin Roberts, Sara Blakely, Daniel Pink, Howard Schultz, Anna Wintour, and more.