The concept of interchangeable goods
Positioning of interchangeable products
Substitutes can be positioned as follows:
Be in the same product line. For example, you indonesian numbers choose between two hair conditioners of the same brand: one is restorative, the other is nourishing. Both are considered interchangeable products on the market.
Be in different sales lines, but represent one brand. An example here is tablets released in different modifications (standard, pro version, etc.).
The products belong to different companies, and one of them may have a world name or be unknown.
Such products are closely interconnected. For example, if the price of one substitute increases, demand may fall. At the same time, customers begin to look for a more profitable product, so the interchangeable product will play a profitable role in this process. If we look at the demand curve, we will clearly see on the graphs how several types of products are interconnected. An increase in the price of one shifts the demand curve of another to the right. With a decrease in cost, the situation changes: the diagram of the second product will shift to the left. This happens because the buyer will in any case take the already known product number two, but the fact that people can switch to the first is not excluded.
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Such demand curves for large factories mean the following: you as a manufacturer must sell not only a high-quality, attractive product, but also the price for it must be adequate. Such a position will help you stay at the top even with low prices from competitors.
If there are similar products in the industry in which you sell your product, this does not mean that each of them is a substitute. It can be considered as such if the cross elasticity is greater than zero, that is, the sales volume of one strongly depends on the price set for the other. For example, different packs of milk can be considered substitutes, since if the price of one changes, you can easily buy another.
Products that are intended for long-term use can be purchased in installments. And demand after that will depend not only on the price of goods with similar qualities, but also on the terms of payment. Example: store A sells a laptop for ₽ 60,000, and point B sells a computer for ₽ 55,000. The buyer will be interested in the second offer: the price is more attractive. But we did not take into account the fact that store A has changed the installment terms: you no longer have to pay the first installment, and the term for making the payment is increased. Perhaps this will play an important role, and buyers will prefer a laptop to a computer. The opposite situation can be seen if the installment terms become stricter: even a cheap product will be taken reluctantly, preferring more expensive analogues.