You Can Have Performance And Quality But You Better Have Pricing
You can have wealth and wisdom, but you better have health. Similarly, you can have performance and quality but you better have pricing.
It is rather common for companies selling in Asian markets to encounter the following problem: Why are their high-margin, good-quality products, which are the rage in the United States and Europe, not fetching high prices here?
Having the right products does not always guarantee successes in Asia as the markets are heavily biased towards pricing. Perhaps, this is ingrained in the 'cheap and good' mentality advanced by mothers. Mother always knows best. Therefore, in order to penetrate the Asian market, companies must not neglect the right pricing for their products.
Henry Ford knew about pricing. He said: "There is only one rule of business and that is: Make the best quality at the lowest cost possible." The early Ford Motor Company was a paragon of lowest possible price. This is because the founder's business model was tuned to a single purpose: delivering an acceptable product at lowest possible price. As Ford's costs fell, the retail price of its model T car fell too.
There are many ways of lowering cost without compromising quality. For example, costs can be reduced by manufacturing or sourcing for parts and components in some low-cost countries. The company can still maintain its brand names and produce the desired products at the right price as nowadays as many customers do not really bother where the components and parts are coming from. Other ways may include franchising, teaming up with other local partners, etc.
The Internet has also rendered pricing information transparent. Customers can compare prices of products that they wish to purchase by logging on to the Internet. Auctions are also offered online. For instance, in the United Kingdom, private cars are sold more expensively to individuals than corporations. Corporations are able to negotiate for a lower price as they order in large quantity for their executives, whereas individuals do not have the bargaining power. With the onset of Internet, consumers can shop for the lowest prices of cars on the Internet. They were able to order cars from Scandinavia countries for shipment to the United Kingdom. Consequently, the car prices plummeted by 20% to 30%.
There is large pool of skilled Indians in the Bangalore software park whose salary is one tenth of that of the developed world and they can perform tasks as well if not better. Chances are that your customers will switch the source to Bangalore unless you have compelling reasons for them to continue doing business with you. Similarly, with the Chinese in the Suzhou Industrial Park who can design and develop sophisticated electronic components and parts at one tenth the cost of the developed world, your customers will demand that kind of costing from you too.
Pricing is not everything but it is an important thing.
Related Tags: internet, cheap, quality, performance, asia, pricing, margin, suzhou industrial park, commodity
Dr Mike Teng (DBA, MBA, BEng) is the author of best-selling book, "Corporate Turnaround: Nursing a Sick Company back to Health." He is known as the "Turnaround CEO in Asia" by the media.http://www.corporateturnaroundexpert.comhttp://www.corporateturnaroundcentre.com
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