Competition is a glorious affair for the consumer. It drives prices lower, encourages diversification of products and services, and enhances the overall service quality of goods and services. Learn more about how competition in the marketplace is in the best interest for consumers like you.
Competition Brings Prices Down For the Consumer
Imagine that there are two companies that sell small recycle bins for your home, Company A and Company B. The service of both companies is relatively equal, they deliver the bins within 3 days, the only difference is the branding and the color of the bins. If Company A sells the bins for $20 and Company B sells them for $14, consumers naturally will purchase the less expensive product. This will force Company A to reduce the price of their product in order to sell their product. This is true of both products and services. Of course, there is a point where prices cannot be reduced further due to cost of production, and supply, but competition helps the market find a “pricing sweet spot” so to speak. If there were no competition in the marketplace, the company selling the product could continue to push prices higher and higher. This is especially dangerous if the product is necessary, such as toilet paper.
Competition Encourages Diversification
The example given above is not exactly accurate in the real world, as companies try to individualize their products to set them apart from their competitors, a concept called diversification. This is excellent for the consumer, as it means that there are more options out there for the products that they are looking to buy. To use the example above, imagine Company B starts producing bins with an attachment that allows you to compress your recycling so that more can fit inside the bin. That forces Company A to come up with an innovative product to drive sales, or they will be left behind.
Competition Enhances Service
Customers are willing to pay a little extra if they get better service, and they will not re-use a company if they received poor service. If a company begins losing customers because their competitors offer better service, they will need to do something to one-up their competitors. Common tactics include: offering food or beverages in the waiting room, including a free gift with purchase, decreasing the wait between order and delivery, and increasing customer service (such as extended hours, quicker response time, increased problem solving, etc.).