The Secret of Pricing and Profits Surging

Just as we completed the CRT terminal, LEAR SIERGER set the price of its terminal at USD 999. So, we decided to set the price of our terminal at USD 970.

“Boss, shall we set the price a bit lower?”

“I agree, after all we are new to the market. Moreover, our cost is controlled very low. However, it might have negative impacts on large scale sales in case the price is set too low.”

It seemed that our staff had some complaints on the price of the terminal set by me. I was still quite confident anyway. We had made terminals with amazing breakthroughs that“DUMB TERMINAL” did not have at all. We were not cheap“DUMB TERMINAL”, but“SMART TERMINAL” with editing function at reasonable price. Such price was 30-40% lower than that of the computer boasting similar functions in the market then.

A rumor of a doomed failure for me was spreading in those days among my staff as well as in the Silicon Valley. It was not surprising for people to have such speculation, since a newly-developed smart terminal was sold at the price of a“DUMB TERMINAL”. However, they could never imagine the power of the micro-information processing component which was less than USD 10.

Orders flooded when the smart terminals from“TELE VIDEO” came out. Our desks were piled with orders faxed from everywhere in each working day. It was too late for other competitors to challenge us when they finally realized our“weapons”—two innovations as semiconductor technology and charming appearance. My family was nearly forced out of home because of this precious mold, while its“angel” appearance saved our company today.

Consumers are not so rational to check only functions during the shopping. It is indeed the“marriage” of heart and mind that determines the purchase. Even for those necessities, a question of“Do I really need it?” is raised when a consumer sees poor looking or inconveniently packed goods. Package or appearance serves as a key selling point, actually.

Sales revenue of CRT terminals amounted to USD 2.3 million with a net profit of USD 200,000 in 1979, the first year when CRT terminals were launched by“TELE VIDEO”. Sales revenue reached USD 13 million with a net profit of USD 1.9 million in 1980. In 1981, sales revenue climbed to USD 35 million with a net profit of USD 5.1 million.

Our business was indeed a huge success. It is unbelievable that it was a“garage company” with a total capital of USD 9,000 only 6 years ago.“TELE VIDEO” became the world No. 1 in the industry of smart terminal within just 4 years.