Sony's PS3 - Penetration Pricing
On face value, Sony's pricing strategy for the new PS3 looks pretty much like predatory pricing. However, it is an illustration of "penetration pricing" for new products: trying to build quickly a strong market position and recoup losses at a latter stage. The market for consoles exhibits substantial network effects (the value to customer increases with the size of the customer base) as well as side-effects (on adjacent markets such as game publishing, etc.). These features make it important to prioritize - in the short run - the size of the market share rather than the profit per unit sold. In addition, Sony's strategy is a good example of "penetration timing" :), as demand quantity will surge during the Xmas period. Anyway, see here for more details and here for a chart with cost/price estimates.
booyaka by jayesh aka o.n
Posted by: guess it | May 14, 2008 at 01:50 PM