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In society today, companies use different strategies to determine their promotional and marketing activities. One of such strategies is known as “competitive parity”.
An organization’s success does not only depend on the fact that it can build a legacy, its ability to sustain that legacy is also crucial. The success of any organization depends on it’s ability to challenge it’s competitors and win.
In this article, we will study about competitive parity and it’s effect to companies.
Competitive Parity is a strategy where a company decides to spend its budget on marketing activities with other competitors.
This means that the funds allocated for promotional and advertising activities will be similar to that of the competitors.
Competitive Parity can be called defensive budgeting because it is normally done to defend and protect the reputation of the company during times like this.
Here, the budget to be used is determined by doing the analysis of the money spent by competitors on advertisement.
Competitive Parity can be defined as when an organization spends at par or spends money of equal value with their competitors.
If the economic value created by a said organization is equal to that of its rival, then it has competitive parity. One thing about the goods produced during competitive parity is the goods are always alike in so many ways.
The funds used for the advertisement are always at par or almost equal with that of their competitors, which means spending less funds. It is very possible for the customer outreach to be similar to that of the competitor.
Competitive Parity is a very affordable method, most companies use the method we call the “demand forecasting method” and “sales forecasting method” to predict the rate of their sales which is very expensive.
It is easier to be at price advantage which happens when the competitors have their prices increased.
One of the disadvantages here is that a company’s objective may be quite different from that of its competitors. This might make wrong estimations in terms of funds.
Competitive advantage is where an organization spends more in order to perform better than the other organization.
This can also be perceived as a situation where an organization has products or goods that is said to be better than that of its rival.
If an economic value created by a said organization is greater than that of its rival then it is said to have a competitive advantage.
In a situation whereby the economic value created is a disadvantage then it is said to have a competitive disadvantage.
To beat competition, you must be in a niche. This niche is all about being in a sector where there aren’t so many competitors. The market may not be large but the profit margin would be so high, you would be glad you are there.
Read on: Competitive Parity vs Competitive advantage
This is dependent on the ability of the organization to produce products that cost less than that of its rival. So the company earns more money by selling their goods at normal market prices than they would have if they sold it costlier.
This is based on the fact that a company or an organization is capable of producing a product that is very unique to society.
A superior value will be created because the product has higher quality. This makes the customers very loyal and insensitive to the price so they become indifferent towards looking for an alternative product because they are satisfied.
This strategy helps to find a particular niche to be involved in. The niche being talked about could be a particular line of product, or a particular group of people to reach out to.
Competitive advantage plays a major role in helping business boom their products to a large audience while still maintaining the rule of not over spending.
Awesome one, I hope this article answered your question.