What Is a Parity Product?

A parity product is a broad product that many brands or companies have produced and, because of their similarities, normally can be used interchangeably. This product can be substituted because each of the products has similar functions, ingredients or both. With one product able to be easily switched for another, it reduces the chances of monopolization, and a company usually cannot charge higher prices without consequences. With all the products being so similar, the battle for sales comes down to marketing, because each brand must convince consumers that its parity product is superior to the competition's.

When a parity product exists, it means there are many brands making basically the same item. There may be minor differences from one to another, but they largely are all the same. These normally include common household items, such as nails, toothpaste, forks and peanut butter. While each brand may add different ingredients or make their version different, it still remains largely the same product.

Parity products may be similar because of ingredients or functionality. For example, nearly all brands of peanut butter are parity products. They all have peanuts and, while something else may be added — such as partially cut nuts, chocolate or jelly — each product is basically the same. At the same time, each brand is expected to make its version at least somewhat unique to entice consumers or to lower prices if the brand is not as recognized as the leading brands.

Monopolization can be a problem when a company is the only creator of a certain item. The company controls all creation and distribution of the item, so it can change prices and force consumers either to comply or go without the product. With a parity product, raising the price usually results in fewer sales for the company. Consumers can easily buy another brand’s product, so pricing remains largely uniform with these items. This makes each brand compete with other brands' parity products, usually diminishing the chances of monopolization.

Each parity product is largely the same, so the battle for sales is conducted mostly through marketing. While each brand may have the same product, it will use marketing materials and sales messages to convince consumers that their product is better than the others. One brand sometimes does have a superior product, but it's more common that parity products function near the same level.