What is substitute product

Many publishers release books in hardcover, paperback and e-book format. Since physical books and e-books typically contain the same information, customers may substitute one for the other. Sandals and flip-flops are two types of light footwear that many people wear. While these types of shoes have different structural designs, they both help people stay cool during warm weather so customers often substitute them for each other. If the price of sandals increases, it may reduce customer demand.

As a result, the demand for flip-flops may increase. Tuna and salmon are popular types of fish that customers may purchase fresh or canned. While the two kinds of fish have different flavors, customers may substitute one for the other in various recipes. If the price of salmon goes up, the demand for tuna might rise as customers begin substituting.

Steel-toe boots and composite-toe boots are durable shoes that include protective reinforcement in the toe area. Since these boots are close substitutes, a higher price for steel-toe boots could create an increase in demand for composite-toe boots.

A price reduction in one boot style could also decrease consumer demand for the alternative product. Minivans and SUVs are automobiles that customers often substitute for one another. They're structurally similar and serve the same purpose of transporting people and cargo. Price is often an important factor that customers consider when deciding which type of vehicle to purchase. Earrings and necklaces are common types of jewelry that often have stark differences in design and use.

This weak connection means earrings and necklaces are imperfect substitutes for each other. Customer demand for earrings may decrease if their price increases, but this price change might not affect the demand for necklaces. Eyeglasses and contact lenses are devices people use to improve their eyesight or help them see in specific conditions, such as at night. Since they serve the same purpose, eyeglasses and contact lenses are close substitutes.

Consumer demand for contact lenses may increase if the price of eyeglasses goes up and consumer demand for contact lenses may decrease if the price of eyeglasses goes down. Red Delicious and Gala apples are two types of the same sweet fruit.

While they have slightly different flavors, they serve the same purpose as a consumer good, so they're close substitutes. If the price of Red Delicious apples rises, consumer demand for them may decrease and the demand for Gala apples may rise. Cappuccinos and lattes are two types of coffee drinks that include espresso and steamed milk.

Since they're composed of similar ingredients, they're close substitutes. If the price of a cappuccino goes up, it could affect consumer attitudes and cause consumer demand for lattes to increase and consumer demand for cappuccinos to decrease. Satellite television services and cable television services use different methods and technologies to deliver television programming to consumers. The consumer population develops a tendency of shifting brands, even for negligible changes in prices.

Due to these factors, companies try to discover various innovative techniques to reduce the prices of products in order to maintain market share. In many cases, one of these techniques is compromising on quality to reduce prices.

On the other hand, if there are fewer substitutes, the situation turns favorable for the producer, and there are chances of creating a monopoly. Substitutes are the reason which motivates corporates for continuous product developments to bring out unique variants in the market with better quality and standards but at reasonable prices, thus providing better customer satisfaction. This has been a guide to Substitute Products and its definition.

Here we discuss its examples, risk, impact, and factors that affect the demand of such products along with advantages and disadvantages. You may learn more about financing from the following articles —. Clear explanations of natural written and spoken English. Usage explanations of natural written and spoken English. Grammar Thesaurus. Word Lists. Choose your language. My word lists. Tell us about this example sentence:.

The word in the example sentence does not match the entry word. In several markets for commonly-purchased goods, some products are perfectly substitutable yet are branded and marketed differently. We refer to this condition as monopolistic competition. Imagine that the price of a can of Coke increases from P 1 to P 2. People would consume less Coke — the quantity declines from Q 1 to Q 2. For a can of Pepsi — the substitute good — the demand curve shifts out for all price levels, from D to D 1 , leading to a greater consumption of the substitute good.

Image: adapted from Wikipedia. However, their packaging is quite different. As the two goods are essentially identical, the only genuine difference between the two medications is the price.

In other words, the two vendors depend mainly on branding and price respectively to achieve sales. Substitute goods are one of the Five Forces.