Table of contents
Key Takeaways
- Component pricing is volatile – supply chain disruptions and demand fluctuations affect costs.
- Publicly listed prices aren’t always the best – negotiated deals often remain hidden.
- Your pricing depends on volume & relationships – larger buyers get better deals.
- If your BOM cost is over 80% of the lowest online price, you’re likely overpaying.
- Negotiation without pricing intelligence is a losing game – gather data before making moves.
Is There Even Such a Thing as “The Best Price”?
Before we can figure out if you’re overpaying, we must answer an even trickier question: What does “best price” even mean?
It’s complicated. Here’s why:
- Prices Change Constantly. The electronic components market is about as stable as a three-legged chair. Demand spikes, supply chain disruptions happen, and what’s a great deal today might be highway robbery tomorrow.
- Prices Are Hidden. If you think distributor price lists or online catalogs tell the full story, think again. The best prices are locked behind negotiated agreements and special pricing structures. (If you haven’t read Here’s the Trick to Electronic Component Pricing, do yourself a favor and check it out.)
- Prices Vary by Region. The best price in North America might be wildly different from what’s available in Asia. Same part, same manufacturer—completely different pricing.
- Prices Depend on Who’s Buying. A small startup ordering 1,000 units isn’t going to get the same price as a multinational company buying a million. Your total spend and strategic value to a supplier matter more than you think.
- Two Prices, One Part. There’s the manufacturer's price, and then there’s the distributor’s markup. Understanding both is key to figuring out where you actually stand.
So, with all this uncertainty, how do you even begin to assess whether you have a pricing problem?
Don’t Repeat These Mistakes
Here’s where many people go wrong: they rely on bad methods to validate pricing. If you’re using one of these approaches, you might be fooling yourself:
“My sales rep swears I have the best price.”
Oh, they pinky swore? Well, that settles it.
Look, salespeople are really good at their jobs. And a big part of their job is making you feel like you’re getting a fantastic deal—even when you’re not.
A trusted salesperson isn’t necessarily lying to you, but let’s just say their definition of “best price” and yours might not be the same.
“I got three distributor quotes, so I know the market price.”
Nope.
Distributors aren’t the ones setting the real underlying price—the original component manufacturer (OCM) is. And guess what? When you ask three distributors for a quote, they’re all going back to the same source for pricing. So you’re not cross-checking anything. You’re just getting the same answer three different ways with different distributor profit margins applied.
“My EMS partner uses their buying power to get me the best price.”
Double nope.
Electronic Manufacturing Services (EMS) companies are incredible at what they do. They manage supply chains, build complex assemblies, and handle logistics. But their incentives don’t always align with yours when it comes to component pricing.
If you’re assuming your EMS provider is passing along their volume discounts to you, think again. They have their own margins to protect.
Pro Tip: Everybody makes these mistakes, don’t beat yourself up about it. For lower value items these methods can be just fine.
Three Clues You’re Overpaying for Electronic Components (probably)
Time to get strategic. Here’s some way to figure out if you’ve got a pricing problem using publicly available information.
1. Compare Your BOM Cost using Online Pricing
Calculate your total bill of materials (BOM) cost using the lowest online pricing you can find (from reputable sources, of course).
Your actual production BOM cost should be about 80% of the BOM cost using online prices.
Not a hard-and-fast rule, but it’s shockingly accurate most of the time. If your price is nowhere near this, you probably have a problem.
2. Check If Your Component Price Is Available Online
If the price you’re paying is easy to find online, that’s a red flag.
Why? Because the best prices are almost never publicly listed. The lowest prices come from negotiated deals, hidden behind closed doors. If you can see your exact price with a quick search, chances are you’re not getting the best deal.
3. Ask: “Is This a Special Cost?”
This one requires a little detective work.
Ask your distributor, “Is this price based on a special cost from the manufacturer?”
The answer should be a simple yes or no. If they hesitate, dodge the question, or give you a vague response, the answer is no.
If your price isn’t based on a negotiated manufacturer discount, you’re probably paying more than you should be.
If any of these clues suggest you’re overpaying, congratulations! You’ve officially identified a pricing problem. Now, what can you do about it?
What to Do Next
Your next mission is not to get the “best price” (whatever that means). The goal is to understand the range of possible prices so you can position yourself better.
Step 1: Talk to People (the Right People)
The only way to get real pricing intelligence is through human conversations.
Start with distributors and manufacturer reps—they are easily accessible and usually more inclined to help. But don’t ask for a better price just yet. Instead, focus on understanding the price range, especially the low end of the price range.
Step 2: Don’t Negotiate Yet—Gather Data First
A huge mistake is jumping straight into negotiations without knowing the market. If you don’t know the floor price, you have no leverage.
So instead of saying, “Can you lower this price?” ask, “What are you seeing out there?” Suppliers will often tell you more than you expect—if you ask the right way.
Step 3: Explore Offshore Pricing
Global price differences can be significant. If possible, build relationships in other geographies and compare pricing.
Step 4: Identify Equivalent Components
If you really want leverage, find functionally equivalent alternatives to your part. You don’t have to switch suppliers yet—just having a viable alternative in your back pocket can change the negotiation dynamic. Here’s a handy guide to component swaps.
Wrapping It Up: Procurement is a Game—Play to Win
The bad news? There’s no magic bullet to getting the absolute best price, it really can take several years to truly find the bottom.
The good news? You don’t need the best price—just a smart price. And now, you have the tools to tell the difference.
Go forth and procure wisely.
Want to make this easy? Schedule a free, no obligation Cofactr demo to see how we can help you automate price evaluation, component swaps, and much more.