Sony’s PS3 Pricing Strategy - Insanity?
by MaxPower
For those of you who haven't been following the PS3 pricing strategy debacle, let me catch you up.
Last year before the PS3 debuted I wrote an article right here on the hallowed pages of Reading for New Times. In it I discussed how I thought Sony's "luxury pricing strategy" was, to be blunt, insane.
Some quotes from that article:
Will Sony be able to make up that head-start in console sales? Well a lot of it depends on the PS3's price point. Sony has been pretty conceited (and defensive) around the expected PS3 price (US$599, C$659, A$999) with a "if we build it, they will buy it" mentality. Check out this quote from Ken Kutaragi (President/CEO of Sony Computer Entertainment):"Is it not nonsense to compare the charge for dinner at the company cafeteria with dinner at a fine restaurant? It's a question of what you can do with that game machine. If you can have an amazing experience, we believe price is not a problem."
Sony's seeming ambivalence around its price point is either a huge mistake or a stroke of genius in that gamers will pay up for both the PS3 system and its follow-on games. I have racked by brain trying to come up with an analogy to this situation (a company expressly ignoring price as a consideration in rolling out a new product) and I am honestly having a tough time. Sony's conceit is amazing and it will be interesting to see how it plays out.
For those who don't know, it played out with Sony getting a royal ass kicking at the hands of the Wii.
Sony has all but admited that the price point was too high. So along comes the speculation of a price cut, but does the Sony brass admit that? July 6, 2007 "July 6 (Bloomberg) -- Sony Corp., the world's biggest maker of game consoles, said it has no current plans to lower the price of the PlayStation 3. ``We have no immediate plans as of now' for price cuts, President Ryoji Chubachi said today in an interview in Tokyo."
Then literally two days later - whoops, $100 price cut in North America on the 60GB PS3 version to $499. Then one week later (that would be today), Sony says - well actually the $100 price cut? That is more like a "clearance sale" as once the old 60GB PS3's are gone you'll only be able to buy the new 80GB PS3 for $599! What a great deal!
A company spokesman said Sony would sell the $500 version until "supplies of that unit are depleted," estimated to be months after the August debut of the new, pricier model."We have ample inventory to meet the immediate needs of consumers in this territory for several months to come," Dave Karraker said in an e-mailed response to questions.
"We won't be making any further announcements regarding our PS3 model hardware strategy in North America until the 60GB model is exhausted and market conditions are evaluated," Karraker said.
So if I am Sony what do I do. Discontinue the 60GB PS3 at $499 in August, sell the "new" 80GB PS3 for a couple months $599 and then cut its price to $499 in time for Christmas? What a stroke of pricing genius. Insanity I say.
I'll say it again: "never have I seen a company expressly ignoring price as a consideration in rolling out a new product." This'll be a business school case study on how not to create a pricing strategy.