When making buying decisions, clients assign budgets to their needs. In a B2B environment, a budget is often assigned before the sales process begins.
At any moment in time, a budget is finite. A buyer determines how much, out of the available spend, can go towards solving the problems of the day.
Once it comes to making a decision, budget spend will always go towards a buyer’s principle pain – whether that is a pain of need or of want.
In other words: if a budget is assigned away from Product A/Problem A towards Product B/Problem B, that is a signal that Problem B is viewed as more painful than Problem A. Essentially, the client can live with Problem A if they have to.
Total budget competitors are the competitors who sell different products and services from other competitors in the market, but they engage in selling to compete for the same bounded financial resources of the customer by offering different products in the market.
$1 VS $500 FORTS! *Budget Challenge*
Importance of understanding budget competition
Budget competition influences a business marketing decisions when convincing a consumer to buy one product instead of something completely different. This can affect the companys advertising strategies, from things like visual marketing and themed jingles to slogans and product pitches. Budget competition also affects the audience of a marketing campaign. For instance, a marketing campaign for budget competitors might aim for a wider audience that may be interested in a product.
What is budget competition?
Budget competition is a term that describes how a primary product may compete with other products on the market for the same portion of a consumers budget. Budget competition can help inform decisions about the pricing, packaging and advertising of a companys product. Products in budget competition arent necessarily similar products. For example, an entertainment item and a food item may be in budget competition because a consumer could spend the same amount of money on either item.
Total budget competition occurs when products are different but fill a similar requirement for the consumer. For instance, a set of movie tickets and a board game are total budget competitors for a consumer looking for entertainment. Total budget competitors are still competing for the same portion of the consumers budget since the consumer often chooses to only buy one of the competing products.
Types of competition
Here are the different types of competition that products face on the market:
Product-based competition
This type of competition describes how a product competes with other products. Here are the different forms of product-based competition:
Consumer-based competition
Budget competition is one type of consumer-based competition, which is a type of competition that describes how consumers evaluate their options between a range of products when trying to fulfill a requirement. Here are the other forms of consumer-based competition:
Examples of budget competition
Here are some examples of budget and total budget competition:
Waterproof backpack example
A company sells waterproof backpacks for $75 each. A different company is selling large, water-resistant storage chests, also for $75. The storage chest is the total budget competition for the backpacks. These products fulfill similar consumer requirements at a similar price point. Some of the budget competitors include a board game, a sweater, a wrench set and a chair that each cost $75. The consumer only has $75 to spend, so they choose between the products. The companys goal is to create a marketing campaign that convinces the consumer to buy its backpack.
The companys product, the backpack, can carry and store things for the consumer while keeping out water. The storage chest, the total budget competitor, fulfills a similar function for the consumer by also storing items and keeping out water. The customer chooses between these two different products, depending on their requirements and preferences. The budget competitors, the game, the chair, the sweater and the wrench set, all fulfill completely separate functions for the consumer, so the consumer decides which function is most important when making their purchase decision.
Hammock example
A company sells hammocks for $50. Its total budget competitor is another company selling backpacking chairs for the same price. The company also has budget competitors, which are different companies selling a carbon steel pan, a personal electric heater, a movie set and a pair of shoes, all at the same price point. When creating its marketing campaign for the hammock, not only is the company advertising to the backpacker who wants their hammock for backpacking trips, but its also advertising to the larger group of people considering buying those other products.
Pen example
A company sells pens in packs of 10 for $20. Its total budget competitor sells colored pencils in packs of 10 for $18. These products perform similar functions at a similar price. The companys budget competition comes from several other companies selling a desk organizer, a vinyl record, a set of magnets and a computer mouse at a comparable price. Many of these products fit within the same category of office supplies, and they all compete for the same portion of the consumers budget. The company uses advertising, marketing and packaging strategies with the goal of attracting the most consumers.
FAQ
What is an example of form competition?
Competitors who compete for the same needs, although they are technically quite different. Examples include: speedboats and sports cars • book publishers and software manufacturers.
What is the category competition?
What is a generic competitor?
