Business Studies – 3.1.2 Understanding market changes | e-Consult
3.1.2 Understanding market changes (1 questions)
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Increased competition significantly impacts a business's pricing and marketing strategies. Businesses must carefully consider their competitive landscape to remain profitable and attract customers. Here's how:
Pricing Strategies: Competition often forces businesses to adjust their pricing. They may need to:
- Lower Prices: To remain competitive, businesses might reduce prices to match or undercut rivals. This can lead to price wars, impacting profit margins.
- Differentiate Pricing: Instead of solely focusing on price, businesses can differentiate their products or services to justify higher prices. This could involve emphasizing quality, customer service, or unique features.
- Promotional Pricing: Using temporary price reductions or special offers to attract customers and gain market share.
Marketing Strategies: Competition necessitates more targeted and impactful marketing. Businesses need to:
- Highlight Unique Selling Points (USPs): Emphasize what makes their product or service better than the competition. This could be superior quality, innovative features, or exceptional customer service.
- Target Specific Market Segments: Focus marketing efforts on specific groups of customers who are most likely to value their offerings.
- Build Brand Loyalty: Create a strong brand image and foster customer loyalty through consistent messaging and excellent customer experiences.
- Increased Advertising Spend: Invest more in advertising to gain visibility and differentiate from competitors.
Examples:
- Example 1: Coffee Shops: The coffee shop market is highly competitive. Starbucks differentiates itself through its brand image, atmosphere, and loyalty program, allowing it to charge a premium price. Smaller independent coffee shops often focus on offering high-quality, ethically sourced beans and personalized service to compete.
- Example 2: Mobile Phone Retailers: Mobile phone retailers compete fiercely on price and contract terms. Retailers often offer promotional discounts, bundled deals, and loyalty schemes to attract customers. Some retailers also focus on providing excellent customer service and expert advice to differentiate themselves.
(6 marks)