Why don\'t more companies do this when they launch a new console?
 

Clearly people are willing to pay huge premiums for the first few weeks/months that a new system comes out, especially if the launch titles are good. However, most companies can't really take advantage of this because if they come out with a huge retail price tag early on, everyone will bash them for it.

But imagine if a company announced that they were coming out on Februrary 1st with their new console and that it would cost $400 for the basic model or $500 for the new model. Then maybe 3 days before Thanksgiving they come out saying that the day after Thanksgiving they are actually going to release some special early systems but that they'll cost $2500 until the normal release date of February 1st.

Some people would definitely pay for that as evidenced by the Ebay auctions, and since they're "doing us a favor" by releasing them early I don't think anyone could complain about the huge price tag.

Seems like a great business plan to me. Thoughts?

Re: Why don\'t more companies do this when they launch a new console?
 

The idea is too transparent.

Besides, the extra money made may not be significant for big coporations like MicroSoft or Sony. But, the negative reaction to the price gouging may create seriious long term damange.

Re: Why don\'t more companies do this when they launch a new console?
 

If they're ready for release at Thanksgiving, wouldn't they make more money by just releasing all that they have at regular price?

Re: Why don\'t more companies do this when they launch a new console?
 

Actually they lose money with every system they sell, as it costs more to produce than the retail price. So they might make a little more by doing this but certainly not a significant amount. And the bad press the higher prices generate would most likely make it -ev in the long run.

Re: Why don\'t more companies do this when they launch a new console?
 

they could say they are releasing say 500k consoles on thanksgiving for 400/500 then a few weeks before say that orders wont be filled only x will be shipped then sell the rest for $$.

Though as dynasty said "the extra money made may not be significant for big coporations like MicroSoft or Sony"

Or maybe say that a boat was hijacked with 100k systems on it then leak them a month early for massive profit [img]/images/graemlins/cool.gif[/img]

Re: Why don\'t more companies do this when they launch a new console?
 

a sicker rollout would be telling everyone your badass system is coming out in feb for 500 bucks.

then on thanksgiving announce that its being released next week for a limited time price of like 250. ship a ton and instant market saturation if the thing rules and has good word of mouth.

Re: Why don\'t more companies do this when they launch a new console?
 

something along the lines of the OP would be smart and follow good revenue management practices

they could release a 'limited edition' system that had a 200gb hard drive and was a different color, etc etc...

they could release some early for a premium

there are lots of things they could do to capture more revenue from the price insensitive consumers...they really should be taking advantage of launch characteristics and segmenting the market


Nintendo coulda released a limited edition wii+zelda package with gold wiimote/nunchuk, gold disc and gold wii for $500...

PS3 coulda released a limited edition package with 200+ gb hard drive and some other features or add-ons

there are MANY ways they could get creative and charge more to those willing to pay it without looking bad to consumers


airlines/hotels/restaurants/etc etc all use revenue management practices to increase their revenue (and thus profits, as adding to revenue has a much larger effect on profit than reducing cost)

Re: Why don\'t more companies do this when they launch a new console?
 

Isn't the majority of revenue from console systems in the games and not the consoles themselves? So if I sold my systems cheaper I would grab more of the market.

Making them dirt cheap doesn't make sense because then for many it would just be a 2nd system.

Re: Why don\'t more companies do this when they launch a new console?
 

at launch, they will sell out of their entire stock, thus making them cheaper only lowers their revenue and doesn't increase their market share

when you are selling out of a product, you should raise the price to capture more money from the price insensitive consumers

they were selling 400k wiis no matter what in US at launch; they coulda made 100k of them gold zelda combos at $500 and that woulda made them $16million more (500-250-50-40=160 extra each * 100k)

they woulda still sold out launch day and consumers woulda been HAPPY that they had a shot at that instead of thinking NES was price gouging

Re: Why don\'t more companies do this when they launch a new console?
 

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If they're ready for release at Thanksgiving, wouldn't they make more money by just releasing all that they have at regular price?

[/ QUOTE ]

not necessarily

Re: Why don\'t more companies do this when they launch a new console?
 

u'll never make more money by releasing all that you have at regular price if that stock will sell out at that price...u are leaving money on the table by keeping it regular price

Re: Why don\'t more companies do this when they launch a new console?
 

btw, the video game console market is far from perfectly competitive. there are 3 major firms, and each likely has significant market power (this means they can raise the price of their product above the perfectly competitive price and still make a profit).

the relationship between console price and video game sales also poses an interesting pricing problem. if people are hesitant to buy a console, but will buy many games once they have a console, it could be in a firms best interest to give the consoles away. while the firm would lose money with each console sold, the profits from video game sales could make up for it.

Re: Why don\'t more companies do this when they launch a new console?
 

The easy way to handle this is obviously for the company to reserve 10,000 units and put them on eBay themselves. They'd make extra money and noone would know that they're dealing with the manufacturer, so no bad press.

Re: Why don\'t more companies do this when they launch a new console?
 

Alot of people purchasing the PS3 early were doing so exclusively for clout - it was rare. When you increase the initial price to $2000 to immediately level out supply/demand, the console is no longer 'rare' - it's just overpriced. You can simply go walk into a store and buy one if you're a fool. See, for example, the history of the Neo Geo. [img]/images/graemlins/laugh.gif[/img]

Re: Why don\'t more companies do this when they launch a new console?
 

no, it still sells out 'some number' at 2k price point

u don't make EVERY ps3 the same price...u offer a limited edition 'beefed-up' version for 2-3k the normal version and those sell out and u get the extra revenue...nobody is upset and ur rep isn't tarnished

Re: Why don\'t more companies do this when they launch a new console?
 

[ QUOTE ]
u'll never make more money by releasing all that you have at regular price if that stock will sell out at that price...u are leaving money on the table by keeping it regular price

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this is too shortsighted imo. i believe consumers "expect" a certain price for consoles. Although many would pay more for the systems, many loyalists may shy away from overpriced systems. i had a ps1 and 2 and i will not buy 3 for a few reasons, one being price. sony lost a loyal customer by having by far the most expensive console. im sure they lost many many more and this hurts them in the future. but i understand your argument wrt leaving money on the table by underselling. i remmeber in my advanced microeconomics class we talked about how bruce springstein sold a ton of tickets for like 20 bucks, those were turned around and sold for like 300ish by scalpers. bruce springstein pretty much just transferred a ton of money to scalpers. but i dont think selling tickets at a high price would hurt his image all that much.

rj

Re: Why don\'t more companies do this when they launch a new console?
 

this is not shortsighted

again i am NOT saying to raise the price of the console

i am simply saying release a super duper beefed up limited edition for more money...this will NOT upset customers since the system is still a 500/600 console...it just allows those who care about 'status' and have the money to spend 1-2k on the 'exclusive' edition

this wouldn't hurt them since they are still catering to most of the customers at the 500/600 price point...they are just catering to those who want the 'limited edition' and can pay for it as well

Re: Why don\'t more companies do this when they launch a new console?
 

Having a 'limited' release with higher prices just doesn't make sense to me...you will be overselling to your most loyal customers...those who are willing to be first and buy a 1st generation system.

Personally I think the key for a successful launch follows in the Nintendo mold. You need to have a huge supply of units at launch. You will never be able to have enough units for every person, but if you have enough that ebayers don't find it worth buying up, and satisfy a majorty of your customers you are set. Any system that release with a short quantity (like the 360, and more recently the ps3) is just stupid, as you create the resellers market, and piss off your loyal fans

Re: Why don\'t more companies do this when they launch a new console?
 

it's not a limited release

it's another version, like 20 vs 60

and it's not going to the most loyal, but to the most price insensitive customers...and those who care about the status of having the 'ultimate ps3'

Re: Why don\'t more companies do this when they launch a new console?
 

also, pretty much EVERY product/service u buy follows these revenue management principles, but u aren't pissed off about them

u can go to a restaurant during 'happy hour' and pay less
u pay more to golf on saturday morning than the middle of the week
everyone on the airplane paid a different price for their seat
same in a hotel
when u buy a 'refurbed' electronic device, it's likely not even refurbed, but simply sold that way to capture some customers that were unwilling to pay full price for it
etc etc etc

Re: Why don\'t more companies do this when they launch a new console?
 

and again, who would be pissed off if Nintendo had released 100k gold wii+gold zelda+gold wiimote/nunchuk combos for $500-600 at launch?

Re: Why don\'t more companies do this when they launch a new console?
 

[ QUOTE ]
and again, who would be pissed off if Nintendo had released 100k gold wii+gold zelda+gold wiimote/nunchuk combos for $500-600 at launch?

[/ QUOTE ]
I think a lot of people if there wasn't regular units for them to buy instead...if this were the only thing available most people would scoff and laugh at it. Also these companies are having a hard enough time producing enough of their regular units...why would they try to produce a 'special' 3rd unit (since ps3 and 360 already have 2 skus). Produce more regular units so the ppl who want them can get them and I'll be happy.

The main goal of these companies is to get as many units into the homes as possible, so they can sell software and gain marketshare so when the system costs come down they can recoup some of their earlier losses (and yes I understand that nintendo doesnt work this way.) By alienating people (low launch numbers/high prices) you start to lose potential buyers who will now find another alternative. The general feel is the ps3 is going this way. How many of us who were really excited about the ps3 are now taking a 'wait and see' approach...I know my friends and I all are. In fact I will be buying a Wii before I buy a Ps3, and I am not a nintendo fan at all. A large part of it is the price point and the availability...not to mention it looks like fun.

Re: Why don\'t more companies do this when they launch a new console?
 

[ QUOTE ]
and it's not going to the most loyal, but to the most price insensitive customers...and those who care about the status of having the 'ultimate ps3'

[/ QUOTE ]

The problem is that the price insensitive consumer isn't the one who is willing to sit out in the cold for 3 days to get a system. People are willing to pay 2k on ebay for the convenience of it. I can't imagine anyone with the time, the money, and the desire to camp out and buy an overpriced system.

Re: Why don\'t more companies do this when they launch a new console?
 

[ QUOTE ]
By alienating people (low launch numbers/high prices) you start to lose potential buyers who will now find another alternative. The general feel is the ps3 is going this way.

[/ QUOTE ]

Thing is, the PS3 is priced the same now as it will be in February 2007 (random month in the future where presumably, Sony will be able to make more consoles).

Would Sony really be pissing people off if they announced ahead of time that the PS3 will be $1k until production ramps up in February, when it will be reduced to $600?

In my mind, it is more honest of them. By making it not a full release, all they do is make a profit for those who are willing to wait in line on release day. But if they made it a limited release, but made it more expensive, they keep the profit for themselves.

Re: Why don\'t more companies do this when they launch a new console?
 

they won't need to camp out since it'll be available in the stores until it sells out; those who are willing to pay that much will buy it when they get to the store; if enough people are willing to camp out and pay that price, then they will camp out; if not, it'll sell out when stores open in the morning

so how is that a problem?

Re: Why don\'t more companies do this when they launch a new console?
 

if Nintendo had 100k gold wiis and 300k normals, then nobody would be any more upset than they already are at the fact that there are shortages

the 100k would sell out opening day just like they woulda if normal, so all it did was allow big zelda fans to get a nice package and make more money for NES

Re: Why don\'t more companies do this when they launch a new console?
 

nich,

console prices do change over time, just not as fast as other things that you are mentioning. look at what a ps2 retails for today vs. when it was released? does that reflect a difference in production cost or was the initial price higher because sony wanted to charge serious gamers more?

Re: Why don\'t more companies do this when they launch a new console?
 

yes, console makers drop prices on consoles not based on cost, but based on consumer behavior; when the wii stops selling at a certain pace, nintendo will drop the price, but as long as it sells above a certain threshold, they will keep it the same


but i'm not talking about changing the entire console's price...i'm talking about creating a 'limited edition' product in order to segment the market and price discriminate, getting more money from those willing to pay more

people who care about having the 'ultimate ps3' or the 'gold wii' more than $$ will give more revenue to the company while the segment of consumers who just care about playing the games on the console and are sensitive to price will buy the standard console; everyone wins and the console company makes more money

it's used in pretty much every industry these days

golf ball makers sell the premium balls for $x to people who want the best and don't care about the price; they then sell 'x out' ones that have a black X on them in magic marker for having 'small defects that won't effect the performance'...all they did was put an X on those; there is no other change; but they sell those for less to those who are unwilling to pay the top dollar for 'a non-defect top rated golf ball'...that's how they segment the market

u'll never make as much money as u can if u charge all customers the same amount for your products or services, as different customer segments are willing to pay different prices...so u must find ways to legally charge one segment more than the other for the same basic product/service...

a gold wii is just one example i've come up with, but there are many other ways they could do it; the key is to do it, tho

they already have done it somewhat with having 2 models: 20gb and 60gb, but they could optimize it even further