Abstract In recent years, with the continuous improvement of domestic industrial diamond production capacity, especially the rapid expansion of production capacity of large enterprises, the price of industrial diamond is gradually decreasing. Coupled with the influence of traditional marketing concepts, major companies do not hesitate to obtain a relatively limited market share through price wars...
In recent years, with the continuous improvement of domestic industrial diamond production capacity, especially the rapid expansion of production capacity of large enterprises, the price of industrial diamond is gradually decreasing. In addition, under the influence of traditional marketing concepts, major companies do not hesitate to obtain a relatively limited market share through price wars. In this environment, customers are gradually being cultivated into price-sensitive consumers. For large enterprises, they can still reduce the unit cost through scale advantage and obtain certain profits. However, SMEs currently have little room for price cuts, and they have no ability to use prices to expand market share, and thus obtain similar scale advantages. In this case, how to survive SMEs may be the primary concern of many managers. The purpose of this paper is to explore how to improve the profitability of SMEs from a price setting perspective. First, talk about traditional pricing methods and their shortcomings. Not long ago, there was a hot issue involving pricing, that is, CCTV’s exposure to Starbucks coffee prices, which believed that the price of Starbucks coffee was significantly higher than the cost, and the accusation was to deceive consumers. Such accusations are obviously unreasonable. Starbucks provides not only coffee but also a way of life, and the transmission of this “lifestyle†can increase the value of coffee itself. Such accusations clearly assume that cost is the only measure of price. Many SMEs in the industry, and even some large companies still believe that the price depends largely on the cost, so the pricing strategy is “cost + target profit marginâ€. This simple pricing strategy does not reflect the market segmentation and product differentiation, and therefore fails to consider increasing the profit margin by meeting the actual value and psychological value of a particular customer.
Secondly, analyze the differences between large enterprises and small and medium enterprises. For large companies, because of their size and market advantages, they can reduce production costs through mass production. On the other hand, large companies can also use their capital capabilities to optimize and integrate the supply chain, thereby further reducing production costs. However, for small and medium-sized enterprises, the scale is limited by the market and the capital is relatively scarce. Although it is superior to large enterprises in terms of flexibility, many SMEs do not seem to use this advantage to compete with large enterprises, but to reduce prices with the flow. To maintain market share, even regardless of their own profits. The result of this is that customers are becoming more and more sensitive to prices, profits are falling again and again, and the original market is not well maintained.
So how can SMEs better compete with big companies and improve their profitability?
1. Understand the value of the product to the customer
Value is the ability to measure a product's ability to meet customer needs, including real and psychological value. The actual value is how much value industrial diamond can help customers increase or decrease in practical applications. The specific value can be calculated by carefully communicating with customers to calculate the exact value; and the psychological value is the satisfaction degree of the product to the customer's psychology, such as purchasing personnel due to procurement. Approved by companies that are suitable for new products and materials developed, this recognition is also valuable to the purchaser. If we can understand how our products create value and create value in the actual application stage of the customer, then we can accumulate these values ​​and calculate a profit that is both profitable for the company and very competitive for the customer. the price of. For example, our diamond cutting efficiency is 0.3 times higher than the best alternative cutting efficiency, then our price can be 0.1 times, 0.2 times or higher than the competition.
2. Subdivide the target market to produce differentiated products
When Haier acquired Japan's Sanyo washing machines and refrigerators in 2011, Haier Group conducted a comprehensive survey of the Japanese market in order to reverse the continuous decline of the refrigerator business. After the investigation, it was found that the proportion of single people in contemporary Japanese society is getting bigger and bigger, and these people do not need to use the large refrigerators that were commonly used at home. Haier was the first to introduce a mini-refrigerator for singles in the Japanese market. This product was highly praised as soon as it was launched. Haier also gradually opened up other markets in Japan with this type of refrigerator. In the field of industrial diamonds, if we can also fully research the market and try our best to meet the needs of this particular market, we believe that we can also establish an advantage in this market and prevent other competitors from entering.
3. Discover market trends and introduce new products that are suitable for
Many people attribute the success of Apple to its continuous innovation ability, which not only adapts but can even lead the market. In contrast, CROCS, which was established in 2002 and 2007, was once booming. The company's share price once rose by as much as 444%. In the meantime, the company has only produced hole shoes, and there has been no improvement. Therefore, in 2008, the net profit loss was as high as 185 million US dollars, which was subsequently acquired by the Dark Horse Group. The market is changing rapidly, and today's products that sell well in the market may lose market tomorrow. In order to ensure the company's good profits and smooth operation, it is necessary to continue to pay attention to the market and promote innovation.
4. Establish a price system to maintain a reasonable profit
In actual work, we found that the bargaining power of SMEs in the industry is very limited. As soon as the customer proposes a price cut, they will immediately satisfy the customer's price reduction request; some may insist on the price, but if the customer's order shrinks, they will immediately compromise. This is especially true for important customers. Many companies measure whether a customer is important based on volume rather than profit. In fact, in the end, this important customer will become a chicken. This is the result of our company not effectively managing prices.
In response to frequent price changes, we can establish prices, discounts and payment standards at the company level, and send all the criteria to the customer at the beginning of the quotation, so that the customer must pay a certain price when it comes to a particular price or clause. For example, if a customer requests a 3% discount, they must meet the discount standard in the original quotation, that is, $200,000 to enjoy a 3% discount; if not, it can be rejected by the company. Another benefit of this is that you can build long-term mutual trust with your customers.
In summary, in the context of large companies competing for price cuts, SMEs can fully utilize different pricing strategies to avoid price competition and achieve stable profits and good company operations.
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