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When all these three are out on the market the standard of gaming is going to rocket. They will all be in competition with each other for market share. But what are and were their tactics leading up to the release of their console? I believe that Sony, Microsoft and Nintendo all have different pricing strategies and these depend on the market that they are aiming their console at.
The first of the three to be released was the Playstation 2. Sony wanted to capitalise on the success of their first console, the Playstation. The price of the PS2 seemed quite high when they first announced it. I believe that Sony used a 'price skimming technique'. This is where a business sets the price high at first then gradually brings the price down to compete with other products on the market. This is what Sony did with the PS2. The initial price was fairly high but a about four or five months prior to the X-Box, a main competitor in the console market, was going to be released they dropped the price. They may have wanted to win over some of the potential X-Box customers even before the X-Box had been released. Sony may also have noted that their sales of the PS2 were falling so they intercepted with a lower price persuading people to look twice at the PS2, becasue of its competative price.
The next of the 'next generation' consoles to be released was the X-Box, just four days ago. The price of the X-Box is tremendously high compared with the Ps2 and the future price of the Gamecube. I believe that Microsoft were using a 'Price Leader' technique when launcing the X-Box. Microsoft are no 'newbies' to leading markets. They have an established market share in many markets through the success of Bill Gates and the Windows software. This is why i think they have used this technique. 'Price Leader' stratagy is when you set the market price. This is normally done when you have the biggest market share, and Microsoft do in most computing markets. I also think that Microsoft wanted to promote all the 'pros' of the X-Box and by slapping a big price tag on it they are using 'psychological pricing' ie. people think if there is a big price tag it must be offereing something good. Microsoft may also be aiming their product at the older gamer. They may have more money and thats why Microsoft have gone with a higher price tag. Or maybe they just want to exploit the gaming public for every last penny they have! You decide.
The final 'next generation' console to be released will be the Gamecube, on May the third. This will be produced by Nintendo who are the grandads of the gaming world. The price tag of the Gamecube looks very inviting. It is considerably cheaper than both the Ps2 and the X-Box. I believe that Nintendo are using a 'Price Penetration' srategy. This is when a business sets the price relatively low. This allows immediate entry to the market, and therefore immediate competition with rival companies. Being the last of three consoles to be released it may have a disadvantage, ie. everyone who wants a next generation console already has one. But the one thing that sets this console apart from the other two is its market. Although it is in the overall console market i believe that it has a well defined niche market - the younger gamer. Nintendo are renound for producing cute platformers and great multi-players like Mario Kart or Goldeneye. They may therefore be aiming the Gamecube at the younger audience ie. hardly any over 18 games and strategy games etc. This may be why they have set their price lower. So gamers who havnt got a steady job ie. children, can afford it.
All three consoles have distinct pricing strategies and are all aimed at probably a different sector, or niche, market. All their differences aside i think they all have one major thing in common, they are all ace consoles and they will all shift a truck load. That is why the future of gaming looks bright so put on those sun shades and lap it up!
The first of the three to be released was the Playstation 2. Sony wanted to capitalise on the success of their first console, the Playstation. The price of the PS2 seemed quite high when they first announced it. I believe that Sony used a 'price skimming technique'. This is where a business sets the price high at first then gradually brings the price down to compete with other products on the market. This is what Sony did with the PS2. The initial price was fairly high but a about four or five months prior to the X-Box, a main competitor in the console market, was going to be released they dropped the price. They may have wanted to win over some of the potential X-Box customers even before the X-Box had been released. Sony may also have noted that their sales of the PS2 were falling so they intercepted with a lower price persuading people to look twice at the PS2, becasue of its competative price.
The next of the 'next generation' consoles to be released was the X-Box, just four days ago. The price of the X-Box is tremendously high compared with the Ps2 and the future price of the Gamecube. I believe that Microsoft were using a 'Price Leader' technique when launcing the X-Box. Microsoft are no 'newbies' to leading markets. They have an established market share in many markets through the success of Bill Gates and the Windows software. This is why i think they have used this technique. 'Price Leader' stratagy is when you set the market price. This is normally done when you have the biggest market share, and Microsoft do in most computing markets. I also think that Microsoft wanted to promote all the 'pros' of the X-Box and by slapping a big price tag on it they are using 'psychological pricing' ie. people think if there is a big price tag it must be offereing something good. Microsoft may also be aiming their product at the older gamer. They may have more money and thats why Microsoft have gone with a higher price tag. Or maybe they just want to exploit the gaming public for every last penny they have! You decide.
The final 'next generation' console to be released will be the Gamecube, on May the third. This will be produced by Nintendo who are the grandads of the gaming world. The price tag of the Gamecube looks very inviting. It is considerably cheaper than both the Ps2 and the X-Box. I believe that Nintendo are using a 'Price Penetration' srategy. This is when a business sets the price relatively low. This allows immediate entry to the market, and therefore immediate competition with rival companies. Being the last of three consoles to be released it may have a disadvantage, ie. everyone who wants a next generation console already has one. But the one thing that sets this console apart from the other two is its market. Although it is in the overall console market i believe that it has a well defined niche market - the younger gamer. Nintendo are renound for producing cute platformers and great multi-players like Mario Kart or Goldeneye. They may therefore be aiming the Gamecube at the younger audience ie. hardly any over 18 games and strategy games etc. This may be why they have set their price lower. So gamers who havnt got a steady job ie. children, can afford it.
All three consoles have distinct pricing strategies and are all aimed at probably a different sector, or niche, market. All their differences aside i think they all have one major thing in common, they are all ace consoles and they will all shift a truck load. That is why the future of gaming looks bright so put on those sun shades and lap it up!
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One question I posed recently was what would happen to GC sales if, in a few months (ie before Xmas), Sony dropped the PS2 price in line with the GC.
Although the audiences of the consoles are very different, half of Ninty's target base are family gamers (the other half being hardcore fans). Now, seeing as it's going to be the head of the family buying the console, the temptation of a DVD player (with the PS2) may be enough to stop GC sales short.
You thoughts?
Although the audiences of the consoles are very different, half of Ninty's target base are family gamers (the other half being hardcore fans). Now, seeing as it's going to be the head of the family buying the console, the temptation of a DVD player (with the PS2) may be enough to stop GC sales short.
You thoughts?
The pricing techniques don't really matter these days as people that fall for the multi million pound PR will pay whatever price console manufacturers puts on it.
The PS2 was sold at £299 at launch because it the first next gen console out, and sony could, even though the launch titles were poor.
The XBox seems to be a similar story, although the gameplay on the XBox launch games are average at best, and offer no new dimension on gaming bar graphically, although many expected no better.
The GC's pricing strategy seems smart as it will be around last, and by the time the GC launches, the PS2 will be well established, and XBox will still be revelling in its half-billion pound hype. The sub £200 price tag will appeal to those who dont want to fork, even if Nintendo's kiddy gaming reputation precedes it.
Personally, I've got a PS2, and am happy. Why should I be bothered about other consoles when I have games to keep me occupied for long enough, with the potential there to keep me looking forward to new titles coming out.
The PS2 was sold at £299 at launch because it the first next gen console out, and sony could, even though the launch titles were poor.
The XBox seems to be a similar story, although the gameplay on the XBox launch games are average at best, and offer no new dimension on gaming bar graphically, although many expected no better.
The GC's pricing strategy seems smart as it will be around last, and by the time the GC launches, the PS2 will be well established, and XBox will still be revelling in its half-billion pound hype. The sub £200 price tag will appeal to those who dont want to fork, even if Nintendo's kiddy gaming reputation precedes it.
Personally, I've got a PS2, and am happy. Why should I be bothered about other consoles when I have games to keep me occupied for long enough, with the potential there to keep me looking forward to new titles coming out.
POP!
Well, exactly... consoles are sold at a loss, with the games and controllers etc making the money back... although these need not be "overpriced" to acheive this.
Oh, and Bill Gates is certainly not as money grabbing as you think. Like I said, the Xbox won't actually make any profit for years due to the low cost of the console, high advertising and development costs of it all. The point is that MS are in the industry in the long term, and in order to make money, they have to make a big loss for the first few years.
As Lenin once said:
We must take one step back to go two steps forwards.
Sonic
Oh, and Bill Gates is certainly not as money grabbing as you think. Like I said, the Xbox won't actually make any profit for years due to the low cost of the console, high advertising and development costs of it all. The point is that MS are in the industry in the long term, and in order to make money, they have to make a big loss for the first few years.
As Lenin once said:
We must take one step back to go two steps forwards.
Sonic
So basically what your saying is that we esentially are getting a discount on the consoles. But to make up for this they over price accessories like extra controllers and probably the games are selling at more than they cost to produce. Hmmm these console guys are cunning arnt they, especially that sly one, that 'Bill' or whatever he likes to be called. :D
Grapo
Grapo
Actually, I think you'll find that consoles cost more to make than they do to sell...
Let me make an analogy:
HP sell printers for far less than the price they cost to make- they'll sell a $300 printer for $150. They make the profit on selling the hugely overpriced ink cartridges, thus guaranteeing them big profits.
I games, Sony and thw rest all lose money on selling the console- the first batch of PS2s had such a high production fault rate that the actual cost per console was $700.
The way the companies make back money is on publishing games- Sony get a small amount of money for every game they publish.
Of course, you might see that at this rate it would need gamers to buy dozens of games before Sony made any money. However, in reality, the price of console production drops in the long run, and people invest in things like extra controllers- thus making up for this apparant difference.
MS have an even bigger job on their hands. The amount they lose per console is so big that they don't expect any profits to be made until 2005. Basically, the console is aimed at getting a hold of the market- not at making money. It really is a massive future investment, and not a short money maker.
Sonic
Let me make an analogy:
HP sell printers for far less than the price they cost to make- they'll sell a $300 printer for $150. They make the profit on selling the hugely overpriced ink cartridges, thus guaranteeing them big profits.
I games, Sony and thw rest all lose money on selling the console- the first batch of PS2s had such a high production fault rate that the actual cost per console was $700.
The way the companies make back money is on publishing games- Sony get a small amount of money for every game they publish.
Of course, you might see that at this rate it would need gamers to buy dozens of games before Sony made any money. However, in reality, the price of console production drops in the long run, and people invest in things like extra controllers- thus making up for this apparant difference.
MS have an even bigger job on their hands. The amount they lose per console is so big that they don't expect any profits to be made until 2005. Basically, the console is aimed at getting a hold of the market- not at making money. It really is a massive future investment, and not a short money maker.
Sonic
Thanks for the constructive critisism. I find it hard to believe that it costs £300 to make a console. All companies want to make profits, and most do it bye putting a price tag on the product that is higher than the price it costs to produce it.
Also why wouldn't Sony want to capitalise on the success of the psone? I think that that was the whole reason for producing the PS2. Take it like this, sega didnt produce Saturn 2, becasue it was a total flop. Sony kept the name of the Playstation and built the console around the Playstation one. They have even kept the same sort of games on it, and not gone for more Nintendo type games.
Well i spose its just my view and everyones view is worthy. Good argument i thought though, we all love a good debate :)
Grapo
Also why wouldn't Sony want to capitalise on the success of the psone? I think that that was the whole reason for producing the PS2. Take it like this, sega didnt produce Saturn 2, becasue it was a total flop. Sony kept the name of the Playstation and built the console around the Playstation one. They have even kept the same sort of games on it, and not gone for more Nintendo type games.
Well i spose its just my view and everyones view is worthy. Good argument i thought though, we all love a good debate :)
Grapo
Good topic, although it reads a bit too much like an economics essay!
Anyway, I disagree with quite a lots of bits...
You say that the price of the PS2 seemed quite high. However, it exactly the same as the original PS launch price, and only just above the price of the N64 at launch. The Saturn cost £100 MORE when it was released, and even consoles further back than that had similar price tags.
With the PS2, Sony did not want to capitalise on the sucess of the PS as you suggest- rather they needed to sell the console at a price that would be affordable to the gamer, while yet still not making them huge losses (the actual console cost far more than £300 to make- sony make profits from publishing games). So the £300 price mark was the normal launch price of nearly every console in recent memory, and seemed appropriate.
As for the price drop, the reasons you give are good... but not actually true. PS2 prices remain "high" in Japan and America, with only a big drop in Europe. What has happened is that the price of the console to produce has been reduced. Sony Europe have found that the market is slightly slowing- so they lowered the price to amass massive pre-Xmas sales. In Japan and America though, the PS2 sales have been so strong that there is no reason to pass savings onto the customer.
Moving onto the Xbox, again, the price is not massively high. Ok, so in Europe it is high compared to the lowish PS2 price, but in the rest of the world it has a reasonable tag. Oh, and remember that £300 is the normal launch price of a console anyway. Remember, he console costs more than £300 to make anyway!
As for the GC, I think you got it spot on.
Sonic
Anyway, I disagree with quite a lots of bits...
You say that the price of the PS2 seemed quite high. However, it exactly the same as the original PS launch price, and only just above the price of the N64 at launch. The Saturn cost £100 MORE when it was released, and even consoles further back than that had similar price tags.
With the PS2, Sony did not want to capitalise on the sucess of the PS as you suggest- rather they needed to sell the console at a price that would be affordable to the gamer, while yet still not making them huge losses (the actual console cost far more than £300 to make- sony make profits from publishing games). So the £300 price mark was the normal launch price of nearly every console in recent memory, and seemed appropriate.
As for the price drop, the reasons you give are good... but not actually true. PS2 prices remain "high" in Japan and America, with only a big drop in Europe. What has happened is that the price of the console to produce has been reduced. Sony Europe have found that the market is slightly slowing- so they lowered the price to amass massive pre-Xmas sales. In Japan and America though, the PS2 sales have been so strong that there is no reason to pass savings onto the customer.
Moving onto the Xbox, again, the price is not massively high. Ok, so in Europe it is high compared to the lowish PS2 price, but in the rest of the world it has a reasonable tag. Oh, and remember that £300 is the normal launch price of a console anyway. Remember, he console costs more than £300 to make anyway!
As for the GC, I think you got it spot on.
Sonic
Liquid Snake wrote:
> G®åpô²ºº² wrote:
> Yeah, thats a change
> - europe normally gets the bum deal! Why is Australia
> getting the
> Gamecube for the equivelent price of £135? Why can they get
> it
> cheaper?
Maybe because there is a smaller market and they know if the price
> is too high peope won't buy it, whereas people will buy it in Europe whatever
> the price
I dont agree with that at all. If its a smaller market the price has to be set higher. This is for obvious reasons, to make it worth while less people have to pay more, more people have to pay less. Do you see what i mean? I dont know why the price is cheaper in Australia, what was the price for America? and Japan? in Uk pounds equivilent?
> G®åpô²ºº² wrote:
> Yeah, thats a change
> - europe normally gets the bum deal! Why is Australia
> getting the
> Gamecube for the equivelent price of £135? Why can they get
> it
> cheaper?
Maybe because there is a smaller market and they know if the price
> is too high peope won't buy it, whereas people will buy it in Europe whatever
> the price
I dont agree with that at all. If its a smaller market the price has to be set higher. This is for obvious reasons, to make it worth while less people have to pay more, more people have to pay less. Do you see what i mean? I dont know why the price is cheaper in Australia, what was the price for America? and Japan? in Uk pounds equivilent?
Pretty good post, with some interesting points made, but still the PS2 is the damn best as it can play DVD and cD and although many people dont use the facilites the GC does lack them an if it came down to equal pricing its gonna be tight
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