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Please stop engaging in price wars! Thanks
2021-09-13
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Author:Frank

As early as 2012, there were media reports that "the domestic printed circuit board industry has become a veritable Red Sea market.
The report at the time gave these data: "The total sales revenue of the top 10 domestic companies accounted for only 23.94% of the total sales of the national PCB industry, and the market share of the first-ranked company was only 3.86%. The domestic market share was 0.51 in 2011. % And 0.70% in 2013. my country’s PCB industry has a low degree of concentration and fierce competition. The industry’s average gross profit margin is around 15%-18%."

A chat between the boss A of a PCB equipment factory and a friend:
Boss A: Yesterday I had a customer here, and I was so angry!

pcb board

Friend: What's wrong?

Boss A: He asked us how much the XX equipment is. I quoted him the price truthfully, and he got excited when he heard the price and said, ‘why is your equipment so expensive? ! I just came out of the XXX factory, and their family's only XXXX yuan, half cheaper than yours. ’

Friend: You get what you pay for. Tell him that your equipment is better than theirs!

Boss A: That's right. I and him analyzed in detail what our equipment is better than others, and what are the advantages in performance. But he didn't listen, he kept talking about it over and over again, all of them are XX devices, they can all be used, your price is too high!

Friend: I remember that the gross profit margin of your equipment is only more than 20 points. And your procurement channel is the best in the industry, and the equipment cost is already very low. The price of XXX factory is so low, there must be something tricky, right?

Boss A: Isn't it? We have made this equipment for so many years, and I know how much it costs. The price they made, to be honest, our cost price is more than that.

But in the world, who is not profitable in doing business? So we did a survey and found that the accessories for their equipment were all bought in the second-hand market of the Electronic City. Those parts have been carefully scrubbed and washed, and then polished and other work. Finally, they are brightened. They look like new ones. They are not professionals and cannot be seen at all.

Friend: Then why didn't you tell that client clearly?

Boss A: I can’t say this. When it comes to the cost of accessories, he doesn’t do our job. I don’t know at all; to tell him whether the machine is first-hand or second-hand. He just entered this industry and just opened a new factory, but he doesn’t have the ability to distinguish. . If I say that their equipment uses second-hand parts, he still feels that I am attacking the opponent.

Friend: It's true that there is no way to say it. What happened in the end?

Boss A: What else? Let him go. Since he pursues cheapness and doesn’t care about quality, let him suffer from inferior equipment first...
In order to grab the order, they cut their minds to lower the price, and even launched inferior products, just to make a profit. Such behavior not only causes losses to colleagues, but also often drives oneself to death.

It is understood that during the peak period of material price increases, in order to obtain orders, some PCB manufacturers still cut prices and then cut prices recklessly, and even carried out drastic production expansions, hoping to reduce average production costs through mass production. As a result, materials increased. Under the squeeze of prices and product price cuts, the pressure of the large amount of funds required for expansion has pushed itself to a dead end.
In fact, all business owners who want to take root in the circuit board industry and become a long-term business hate it when they talk about bad competition such as vicious price wars.

But how can we effectively avoid this vicious competition?

When I visited the companies in the industry, I found that some people of insight in the industry have explored a more effective way. I will share with you here, and I hope you can refer to it:
Set the gross profit margin of new products within a reasonable range from the beginning, instead of setting the interest rate at 100% or even higher based on new products and new technologies.

Because it is not a huge profit, it will not attract a large number of profit-seeking businessmen. This has blocked a large group of people who only care about making money and have no ethics from the source.

Even if there are still people who are staring at a small profit, they have to climb up the wall to fight. Those companies that can launch new products and new technologies have the real ability to knock them off the wall:

A: If the price of competitors is similar to theirs, customers are definitely willing to choose them. Because they have long qualifications, high technology and good reputation;

B: If the price is only a little cheaper, the price advantage is not obvious, and it is difficult to make customers tempted.

C: If the price is much cheaper, these opponents will either lose money or fail to keep up with the quality of their pcb products. These opponents may have the upper hand in the first one or two rounds, but over time, they will lose without a fight.

We all look forward to a clean and orderly industry, but instead of hoping for others to change, we should start from ourselves~