Gross profit margin usually depends on the following factors:

market competition

As the saying goes, if there is no such product on the market, or there are few such products, or this product has advantages in quality and functional value compared with similar products on the market, then the price of the product will naturally adopt a high-priced strategy. On the contrary, if the market is saturated by operating road products or sunset industries, then it can only be achieved by following the sales price of the crowd and realizing the average sales gross profit.

Enterprise marketing

Is it to expand market share or other reasons? If it is to expand the market share, we can open the market at a lower price first, and then readjust the pricing strategy according to the degree of market recognition after the market is stable. If it is to recover the investment as soon as possible, the enterprise may enter the market at a higher price, and then gradually penetrate. The market usually rewards mature products with high prices but small quantities. How to balance price and sales volume to maximize profits?

R&D cost

A feature of modern economy is that products are updated quickly. If new products with emerging functions can be developed faster and better, and the products have advantages in function, use value and price, who can occupy the highest point in the market? Enterprises have a large amount of R&D investment, usually they have many inventions, and they get more benefits from patent protection. Emerging products have great advantages in cost and efficacy, and their gross profit is also large.

brand effect

If the enterprise is well-known, such as its products have well-known trademarks or local well-known brand trademarks, and the product quality is recognized by the market, then the gross profit of such products will usually be higher. On the contrary, even if the quality of brand-name goods is good, the gross profit margin of their products is usually not as high as that of products with high brand value. Of course, we can't generalize. The gross profit of some well-known brand products belongs to the middle level. Mainly rely on higher sales to earn profits, while some brand-name goods mainly rely on counter and manpower expansion because they don't spend on advertising. Because the advertising expenses in their prices are not large, their gross profit margin is high.

fixed cost

Mainly refers to the investment in fixed assets, such as machinery and equipment, workshop, workshop rent, etc., which constitute fixed manufacturing expenses. From a certain perspective, it also reflects the entry threshold of enterprises. In order to recover this huge investment cost, enterprises will also increase the gross profit of products. On the other hand, if enterprises invest less in machinery and equipment, or assemble and process them in the form of OEM, or entrust processing, part of their sales profits will be given to third-party manufacturers, and the gross profit of their products may only be average.

Technical cost

For example, if an enterprise produces patented products with independent intellectual property rights, especially invention patents and technology patents, and the patented products have advantages over the original similar products in the market in terms of product quality and product function, have cost advantages, are exclusive in competition, and naturally have the ability to raise prices. At this time, the gross profit of products is usually higher;

Technological process

The technical requirements of employing people, the size of labor cost, the complex production technology of products, high technical content and high level of technicians used will naturally lead to high gross profit of their products. On the contrary, for highway products with simple technology and low technical content, it is certainly impossible to have much gross profit.

turnover rate

Because accounts receivable will take up the cost of capital, and the boss usually takes this cost of capital into the sales price, that is to say, if it is on sale, the transaction price will be much lower, but if it is on credit, the transaction price will be higher than the cash sale, and the high sales price means large gross profit, while the low sales price means small gross profit. If the turnover rate of accounts receivable of the enterprise is small,

life cycle

Generally speaking, a new product with brand-new functions has a relatively high initial gross profit, but as time goes on, with the expansion of the market and the participation of competitors, more and more people are doing it, and enterprises are bound to reduce prices and promote sales. At the same time, with the rising prices of raw materials and labor, its gross profit will gradually decline, which is more obvious in the health care industry or high-tech industry.

Product parts

Generally speaking, whether the enterprise solves the problem by itself or outsources the processing, the Mao Lijiao of the enterprise that produces its own products is high, and the profit of the enterprise that outsources the processing to produce its main parts should be divided into some partners. At this time, the gross profit of the enterprise is relatively low.

The above analysis of gross profit margin is only general, but there are exceptions.

For the distribution of gross profit rate, the gross profit rate of high-tech industries is usually higher than that of ordinary industries, and that of emerging industries is higher than that of traditional industries and sunset industries. Compared with similar products, the gross profit margin of the newly developed products is higher than that of the original old products.