What is Competitive Parity in Marketing - A Detailed Guide

Are you wondering what competitive parity means? What is a competitive parity budgeting method? We have covered it all in this guide along with a few examples.


TABLE OF CONTENTS

  1. What is Competitive Parity?
  2. What is the Competitive Parity Budgeting Method?
  3. Competitive Parity VS Competitive Advantage
  4. Examples of Competitive Parity


What is Competitive Parity?

Competitive parity is a marketing strategy that aims to achieve business performance that is at par with the competitors in the industry or the market average. This strategy employs a tactic where the company adopts an optimal expenditure that is in the close ballpark of the average industry spending. Here companies don’t develop a competitive budgeting strategy to beat competitors but instead, the goal is to achieve average results. 


competitive parity

Competitive parity is known as a defensive strategy used to defend the reputation of a company.  The idea is to replicate the competitor’s budget in terms of their ad spending or promotional activities. The core goal is to not go above or beyond but to acquire an average competitive position in the market without spending much. 

This strategy is mostly used when companies venture into new markets or domains. Instead of constructing a unique branding strategy, the company will prefer to emulate what its competitors have done to acquire a respectable position in the market first and then work towards creating a unique selling proposition for the product. 


What is the Competitive Parity Budgeting Method?

Companies implement the competitive parity strategy by emulating their competitor’s budgets. At the heart of competitive parity is the desire of companies to maintain their reputation in a new market without spending less. So budgeting is very important in implementing this strategy. 

The competitive parity budgeting method very carefully evaluates and determines the competitor’s budgets and spending. This can work in favor of the company, as it provides a predesigned budgeting strategy that can help the company take off. But at the same time, since you are blindly replicating your competitor’s spending tactics the companies might end up falling for the same loss their competitors would. 


Competitive Parity VS Competitive Advantage

The terms competitive parity and competitive advantage are essentially opposites to each other. On the one hand, where competitive parity is restrictive and defensive, limiting their spending to the market average aiming for average results. 

The competitive advantage strategy is the exact opposite. Here companies are constantly looking for ways to gain a competitive advantage over the other players in the market. Competitive advantage strategies’ primary goal is to gain above-average results to surpass the outcomes of their competitors. This is a deliberate strategy that exploits all possible ways and advantages in the market. 

The competitive parity position can often stem from a failure to outperform the competition. So companies choose to settle for average results. But it can also be adopted as a defensive way to maintain reputation and quickly establish a footing in a new industry. 


Examples of Competitive Parity

Companies adopt these strategies in a number of different ways. Some of them are mentioned below. 


1. Adopting Best Practices 

The most common way of implementing competitive parity is by adopting the best practices your competitors swear by. The best practices can be defined as the commonly considered best method to reach a goal or implement a strategy. 

Best practices can be adopted within an industry or can also be implemented across industries and sectors. Adopting best practices is a sure short guaranteed way to gain results quickly without much trial and error. 


2. Standards

Standards are the officially approved way to implement a goal. The authorities or researchers on the topic after testing all the different mediums create the standards. Companies adopt standards in competitive parity to quickly build capabilities. 


3. Strategy

Businesses very blatantly emulate the competitor’s strategy to gain quick results in competitive parity strategy. 


4. Outsourcing

Another way of mastering a function that the company is not proficient at is by outsourcing the function. It reduces the burden on the company and allows it to focus more on the business goals. By outsourcing, instead of spending valuable time and resources in creating elements, companies choose to outsource their production, letting the experts take care of it.

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