Extraordinary Genius - Chapter 632
Chapter 632 – Promotions (Part 1 of 2)
Now, all sorts of VCD player brands had appeared all overthe world. The traditional VHS market had shrunk. All the manufacturers werelosing money. Some of the big brands stopped their production of VHS players.This was because they had the authorization to use VCD technology.
Those smaller factories went burst. They had tried to selltheir VHS players at a loss, but no one wants to buy them. This was like afterthe appearance of mobile phones, no one wants to purchase pagers.
When all the companies were negotiating on the retail priceto protect their profits, Wind and Rain did something unexpected.
Wind and Rain VCD player had a promotion for their pricecuts!
Wind and Rain Electronics had invented the VCD player, andthe initial prices were set by them. After the authorization was issued to theother companies and other brands of VCD players appeared, Wind and RainElectronics was still selling their VCD players at 3,000 RMB.
Sony and the other companies were still laughing at Wind andRain. You think Wind and Rain is a big brand? Is your brand value as high asSony? You will fail if you try to make use of your brand to increase yourprofits.
This was the truth. Wind and Rain VCD player sales start todecline. When Sony’s Norio Ohga knew about this, he was overjoyed.
Do you think you can sell your VCD players at such highprices because you are the ones who produce it first? Are you regretting? Yourhigh prices are causing you to fail.
But now, Wind and Rain VCD players suddenly announced apromotion and price cuts. It was a massive price cut! The VCD player retailprices had dropped to 1,999 RMB from 3,000 RMB! The other companies wereselling their players at over 2,000 RMB. Wind and Rain was a few hundred RMBcheaper!
At the same time, Aiwa VCD and AIWA VCD also announced theirprice cuts. It was the same as Wind and Rain!
The other brands were stunned. The consumers will no longerbuy their VCD players. These 3 brands were the oldest brand of VCD players.
This year, RMB suddenly depreciated against othercurrencies. Last year, the rates of RMB against USD was about 5.8:1. Now, itwas 8.2:1. That means 50 USD of authorization fees were equivalent to more than400 RMB!
The difference in retail prices of Wind and Rain VCD playersagainst other brands was about 50 USD. All the companies were furious.
Wind and Rain Electronics was too much. They lowered theirretail prices, and the other companies had to follow. They had to lower theirretail prices to about 200 USD. Their production cost was about 100 USD, andthe authorization fees were 50 USD. There were not many profits left. Almostall the profits were taken away by Wind and Rain Electronics.
The most frustrating part was Wind and Rain did not lowertheir retail prices after they issue out the authorization. If Wind and Rain droppedthe prices from the start before the other companies expanded their factories,the losses would not be so high. Now, the companies had increased theirproduction, and their profits dropped. It will be hard for them to survive.
Feng Yu had been waiting and maintaining the retail pricesfor this moment. He wanted to wait until those big brands expanded theiroperations and then lower the prices. He wants to use this opportunity to wearthem out.
Feng Yu knew clearly the production cost of a VCD player. Inthe past, the cost of producing a Wind and Rain VCD player was more than 1,000RMB. But as the factory scale increase, workers became trained, and theefficiency of the facilities upgraded, the cost dropped to about 600 RMB. Thisalso showed that Feng Yu’s profits were way higher than other companies. Theproduction cost of other companies should be more than 1,000 RMB.
Those companies had just expanded their scale. Their workerswere still not familiar with the production process. Some of the coretechniques were not sold to them, and these cause their production cost to remainon the high side.
Actually, this was still fine for the companies. If theirproduction cost was about 1,000 RMB, they could sell the players at 2,000 RMB.But these companies still had to pay taxes, transport, and sales cost. Theirprofits will not be high, especially in Chinese companies. The earnings for oneVCD player was about 50 USD.
But Feng Yu’s sudden price cuts had killed these overseasbrands. There was no way for them to continue manufacturing VCD players. Theyhad two possible solutions. First, companies can produce VCD players in China.This way, the companies will not have to pay the import duties and lower thecost of transportation. But the companies had to build factories in China. Theinvestment will be huge. The second solution was to withdraw from the Chinesemarket.
Most of the overseas brands chose to withdraw from theChinese market. The companies also withdraw from the region where AIWA hadbranch factories. These factories were also producing Aiwa, AIWA, and Wind andRain brand of VCD players.
But those companies realized that they had handed over mostof Asia, Europe, and US markets to Wind and Rain.
How can this be done?! The companies had just opened up themarket, and when they were about to see the profits, they had to give up themarket. They had been busy for nothing.
In the end, these companies came to an agreement. They willonly withdraw from the Chinese market. In other regions, these companies hadbigger factories than AIWA. They will be able to compete with them.
Most importantly, if these companies withdraw from theseareas, they will lose their VCD market share and the DVD market in the future.
There was nothing these companies could do about this. Theyalso drop their retail prices. After all, these companies still have a smallprofit after the price cut. But if they withdraw from these regions, they willnot even get this small profit!
Price cuts were the fastest and simplest way to get themarket share. In Feng Yu’s previous life, many brands used this method to gainmarket shares fast. When they have obtained the market share, they willincrease the retail prices for more profits.
After Feng Yu used this strategy, the Wind and Rain VCDplayer market share increase to 50% again. This figure was still increasing astheir sales rise.
The overseas market sales also increase. Once again, Feng Yuhad the upper hand.
Jiang Wanmeng and the rest also noticed that after the pricecuts, their profits did not drop as there was an increase in sales. These fewmonths, the sales of VCD discs had increased beyond their imagination. Wind andRain Electronics had received more profits than before!
There was still the authorization fees collected from thevarious companies.
Feng Yu started the second phase of his promotion campaignafter the other companies drop their retail prices. Buy a VCD player andreceive free movie and music discs.
Buy 1 and receive 2 free. This promotional effort was toobig.
Most of the people bought this VCD player to watch movies,listen to music or to sing. The consumers had to buy the player and the disc.The total amount of consumers had to spend was a lot. It was like buying a carand paying for petrol. The consumers might not feel the pinch when they purchasethe discs. But if they total up the amount spent on discs, it was a lot.
The cost of one disc, including the copyrights,transportation, etc. was not more than 10 RMB. The free discs were worth only20 RMB.
“Manager Feng, our sales had increased again. This promotionyou suggested was too worthwhile!” Jiang Wanmeng said excitedly.
“This is nothing. The next promotion will be a lucky draw.Whoever that bought our product will entitle to a lucky draw. The top pricewill be a full rebate of the things the consumer purchase. The second prizewill be a rebate of 50%. The third price will be the Bladeless fan……. Theconsolation prize will be a movie or music VCD disc. Everyone will winsomething!”
Feng Yu made use of some of the promotion strategies used inhis previous life. Those big brands did not know who to set up a good promotioncampaign, and they will fail!
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