| This article is mainly about the price war on color-TV, pricing strategy of TCL and the important role it plays in market competition with TCL Changchun August 2004 operation as an example. Color-TV industry is an important part of our electronic industry and it has become one of the supporting industries in our country after 20 years'rapid development in the late 20th century. Accompanying with this great achievement, there always exists fierce market competition. Especially from the second half of 1990s till now, price, information and sales promotion wars emerge in endlessly. Among them, the price war is the most remarkable. Causes for the price war vary. In view of domestic relationship of supply and demand, generally speaking, the need for color-TVs is increasing. It reached a climax in 1999 with 39,900,000 sets, dropped sharply in 2000 to 28,120,000 and began to re-increase from 2001. A maintaining capacity of 40,000,00 sets is expected during 'shiwu'period. But, output of color-TVs had already reached 42,620,000 sets in 1999 and in 2004 73,288,000. The surplus caused by over-expansion leads the industry into a malign competition state of narrow-margined profit or deficiency. In view of demand-elasticity as in microeconomics, color-TV is a product of high demand-elasticity and high cross-elasticity, thus of comparatively high price-sensitivity. In view of marketing channels, the competition aggravates with 'suning', 'guomei'and other chain enterprises occupying a larger and larger proportion in household electrical appliance retail market. Interactivities between manufacturers and dealers contribute to the price war, the color TV industry comes to a super-competitive age. The incomplete market and the oligarch monopolization result in the price war. Besides, our investment in research work is far from sufficient. The problem of product homogeneity is serious. We can not get rid of the awful cycle of price competition, functional improvement, imitation and price wars. However, the price war is a necessary approach for an enterprise's upgrade and development. It will improve and enhance the value-added workflow efficiency, centralize and consolidate an enterprise's power of core competency. Depreciation may occur on a production surplus, a market-share fall, an economic decline or a purpose to reduce costs with sales-promotion. But depreciation is a 'two-edged sword'. If an enterprise puts up market competition with depreciation, there will exist profit trap, unstable market share trap and low-quality trap. Therefore, TCL's price strategy bears different features in different developing periods. In the early days, it is an initiator of the price war with wide-screened TV sets and inexpensive price. It makes full use of the principle of high cross-elasticity which is an excellent combination of low price strategy and focus strategy. In the fast-developing period, it is a follower of the price war in a combined way of low-ranged depreciation and product characteristics, thus guarantees certain percentage of profit and market share, avoids depreciation trap in the meantime. In the steady-developing period, it takes no consideration of the price war or face it with prudence. It uses double brands to raise its image, with 'digital lehua'to sell down-scale products. Under market economy, every enterprise or company will fix the right price for the products it produces or deals in. As one of the marketing tools of 4P, pricing is the most important and the most difficult to handle. Pricing strategy is an important part in marketing strategy. It influences on customers'purchases, competitors'marketing operations and the product image. It restricts arrangement of other marketing elements, restricts developments of theenterprise or company. To achieve a certain strategic goal, an enterprise should aim at the right price, analyze overall costs, demand, competition and other aspects, use scientific methods and maneuver flexibly to fix a price acceptable to the customers. This article analyzes on color-TV pricing strategy with TCL Changchun August 2004 operation as an example. Generally, the price of TCL color-TV is 5%-8% higher than other domestic brands. Its brand-level is inferior to that of Japanese, equals to that of South Korea and superior to that of inland. While pricing, first it takes present competitors into consideration, makes a combined pricing plan and sets up a corresponding product line. Then based on the 4 phases of product, i.e. introduction, promotion, maturation and depression, based on a good combination and collocation of present products, it manufactures the products suitable to Jilin Province. It uses price-lever to dispose top products, middle-leveled products and low-ended products after confirming that the price is synchronizing with the time-axis. According to the Head Quarter's sales strategy, it substitutes old products with renewed ones from time to time while giving up former types as planned. In this way , it prolongs the product's life effectively. TCL adopts retro-pricing as its pricing strategy which is highly scientific and reasonable. First, this retro-form can be divided into seven horizontal parts and five vertical phases. Seven horizontal parts refer to the settlement price, the retail price, the gross-profit rate, the margin between settlement price and retail price, the profit of sales department, the profit of dealers, the market investment and the adjustable items. Five vertical phases mean image, sales-promotion, emphasized promotion, hitting-out and super-low pricing. All costs deducted, the margin between the settlement price and the retail price, i.e. the balance is adjustable. It is regarded as the backup of all costs and the net profit. Thecompany can see all the costs in sales process by using this pricing system, can regulate them whenever needed and can balance them with different means of sales promotion, therefore disorder of the whole pricing system can be avoided. The five vertical phases are operated based on 4P principles. It guides the way for TCL color-TV, enables sale promoters and dealers co-controlling on the sales models, uses product combination with marketing strategy and sets up management at different stages to make it more reasonable and effective. Meanwhile, the company arranges and makes up the products according to resource collocation of the Head Quarter, reinforces better connection and interaction. In this way, it wins bigger market share and challenges other competitors more effectively while ensuring reasonable profit for the dealers. The pricing system is improving and aiming at more competitors. First, the company makes a certain price comparing with the retail price of the target product by collecting and trimming product information and sales information of the most competitive brands. Then it does fully research works on the product of other brands and compares it with self-owned product in aspects of function, outlook and price to find out the advantages and the disadvantages. Finally it fixes the corresponding retail price and leaves no space to the competitors. TCL's combined pricing strategy differs in specified market with top products setting up image, middle-leveled products gaining profit and low-ended products occupying the market. There are the skimming pricing for top products, the right pricing for middle-leveled products and the penetrating pricing for low-ended products. All these are based on the company's marketing strategy. |
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