Publicizing BOM prices is the best marketing position for latecomer LeEco

The LeEco mobile phone launch held on April 14 may have attracted more attention than the organizers themselves expected, and even the location of the launch became a hot topic. However, no matter how vulgar the marketing practices of challenging Apple are, and how much the mobile phone design looks like a plus or a MX, it must be said that Jia Yueting has found the only way for Internet companies to compete as latecomers, that is, the disruptive innovation that has been talked about for a long time. Whether the official disclosure of BOM prices is effective is not within the scope of this article. We only look at the trend implied by this move.

The first half of this mobile phone launch conference caused collective complaints from reporters in the group because of the overly vulgar marketing methods. However, after the mobile phone price and even the BOM price were officially disclosed for the first time, the situation was finally reversed. Price, as the number one marketing tool, unsurprisingly occupied the high ground of public opinion.

BOM is the abbreviation of Bill of Material, which means the sum of component costs in the manufacturing industry. Publicizing the BOM price means that consumers can calculate the hardware cost of the phone based on it, and LeEco’s official price is set lower than the BOM price, which is the most direct way to express that it “does not make money from hardware”.

Although some people in the hardware industry later angrily stated that "publicizing the BOM price is suspected of violating the confidentiality agreement" and "LeTV is making it impossible for everyone to play", in the mobile phone industry, BOM is actually no longer a secret. After a popular product is launched, there will be special hardware media websites that purchase the machine and disassemble it, and give the hardware cost price according to the component level. In the early years, the hardware cost of iPhone $190 and Samsung $250 was done by these websites. After the Xiaomi bracelet was launched, Geek Park also gave the BOM price at the first time.

In the past, after the products were disassembled and quoted, manufacturers either ignored it (such as Apple), or responded that the cost of mobile phones is not only the BOM price, but also R&D, taxes and even operating costs, etc. There is nothing wrong with these practices. Even though Jia Yueting revealed at the LeTV press conference that the prices of iPhone and Samsung were increased by 150% on the basis of BOM, and Xiaomi also increased the price by 20% on the BOM price, this is not a reason to blame them at all. Whether from the perspective of brand premium or cost pricing, there is no reason to require mobile phones to be priced according to the BOM price. In other words, the pricing strategy is completely free for the enterprise. According to economic laws, it only depends on supply and demand, not on cost.

However, as the first official manufacturer to disclose BOM prices, LeTV's move will still have a huge impact on the entire industry. In China, which has just entered a well-off society, "cost-effectiveness" will always be the first selling point of the manufacturing industry, which lacks marketing creativity. Manufacturers like to say it, and consumers also like to admit it. In the long run, one day, this method will reach its extreme - that is, the hardware will be free. And LeTV's public disclosure of BOM prices has officially reached this critical point. It must be said that this point will still be recognized, because in the vast Chinese market, there are high-end users who can repeatedly buy out Apple products, as well as users in third- and fourth-tier cities, student users, and users who want to change their phones. Price is still the first factor for them (the first standard for major e-commerce websites to distinguish goods is still the price range, which caters to this habit of consumers).

From now on, if they want to emphasize cost-effectiveness, follow-up manufacturers must also disclose BOM prices and even the complete cost structure. People in the industry may say "this is unscientific" or "this is unethical", but consumers outside the industry will not pursue so much; the best proof of food safety is an open kitchen, and the best proof of high cost-effectiveness of hardware is to show the cost.

Unlike some previous concerns that "this will make the hardware industry unprofitable and thus lead to industry shrinkage", Uncle Miao believes that there is no such concern in the IT industry. Wu Jun summarized the three major laws of the IT industry in "The Top of the Wave", which is the Law of Made in China, along with Moore's Law and Andy Bill's Law: in any industry, after Made in China intervenes, the profits brought by the cost difference in the mid- and low-end markets will disappear, and almost all will be monopolized by Made in China.

From the nature of the Internet, its role in accelerating the flow of information and significantly weakening information barriers to profit will only become stronger and stronger. The more automated the industry, the lower the unit cost. The consequence of this strong development will only be a significant shrinkage of the simple buy low and sell high industry, and the entire industry's profit point will quickly shift to the service industry where people are the main force and machines cannot replace it. After information technology entered the manufacturing industry, standardized manufacturing itself has become unprofitable. LeTV's public BOM price is just a push in this trend, and it has also reaped the first bite of marketing attention.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.