Sony Psp Pricing the Strategy

Sony PSP Pricing The Strategy and Tactics of Pricing for Sony's PlayStation 3 (PSP3) Sony's initial pricing strategies looked to capitalize on the relatively high level of price elasticity that existed in the high end of the gaming market while at the same time using price to ascertain the relative shape of demand curves in each of the geographies they launched the PSP3 in.

Kotler, P, & Keller, K (2006) point to the factors of a product being more distinctive, less susceptible to substitutes overtaking its unique position, with the unique enough attributes that make consumers' comparisons of the products' quality features all contributing to the relative elasticity of a product. Sony realized that in the PSP product series there was a high level of uniqueness and therefore would have a degree of price elasticity following its initial product launch.

In addition to the strengths of being perceived by many gaming enthusiasts and experts as being the most advanced gaming system on the market, Sony had taken many efforts to ensure PlayStation 2 (PS2) content was also ported to the device, in addition to investing heavily in 3rd party support with game developers.

Sony also had specifically worked on creating a high level of product differentiation by including multiple levels of functionality into the PSP3, a product strategy move to both support is pricing and product strategy objectives In launching the PSP3, Sony had to also price to regional and national perceptions of value for the revolutionary gaming and entertainment system.

Pricing history by nation the PSP3 launched in shows a definite perceived value pricing, a term defined by Kotler, P, & Keller, K (2006) as including the buyer's image of the products' performance, the value of channel deliverables, performance of warranty quality and customer support processes, in addition to the softer attributes of the company's reputation and trustworthiness. This is in turn made more challenging by the implications of pricing on distribution channels, including the allocation of significant amounts of margin to each intermediary in an indirect channel (McKinsey 2003).

Analysis of Sony's Pricing Strategies Sony's initial pricing, while above the closest competitors by $50, was primarily used as a means for communicating premium market positioning over purely being a price penetration strategy. Sony's initial launch of the PSP3 was aimed at the adult gamers who would see the initial price point as an indicator of the devices' superior functionality and value. Making a Blu-Ray/DVD/CD drive standard across all models was a deliberate product strategy to attract adult gamers who also are high-definition video enthusiasts.

Sony's pricing strategy then was to use the combination of enhanced functionality (Blu-Ray) in conjunction with a higher-than-average price for this segment of products to attempt to create an entirely new market. Whether this strategy constituted ones that is a "blue ocean" or "red ocean" strategy as defined in the book, Blue Ocean Strategies and discussed in by Columbus (CRM Buyer 2005), the fact is that Sony was successful in achieving its market positioning.

Adults purchased the PSP3 specifically for its high resolution gaming capability, in addition to Blu-Ray functionality as well. From this standpoint, Sony was successful in using pricing as a significant messaging part of their product mix.

When analyzing the pricing strategies Sony has relied on since the introduction of the PSP3 globally, the observations of Porter (1999) on the implications of price as competitive advantage within his Determinants of National Competitive Advantage (sometimes called the Porter Diamond) illustrates how Sony is using price to attempt to create equilibrium across Factor Conditions and Demand Conditions (pg. 78).

The approach Sony takes to first ascertain the demand curve by geography first, and second, to create unique and differentiated market positions second, align with the approach Porter (1999) advocates in using as he calls it, the Diamond of National Advantage" to attain demand equilibrium and in balance. Porter advocates innovation and human productivity as the two most potent differentiation strategies for entire industries and their strongest industries, hence the title of his article and the book it is based on.

Pricing, in the context of the Porter Diamond, is both a tactic and an indicator of greater process efficiencies, as is shown in the Italian Tile example Porter cites. The implications for Sony of these two points are that first, innovation does create a price advantage and in the shortened product lifecycles of advanced gaming systems, the pricing advantage quickly becomes inelastic however as new competitors enter the market.

The role of innovation is to continually fuel the development of new products and therefore bring companies, like Sony, into new markets where competitive advantage is more attained through process execution and less purely on price. Sony's pricing strategies have had to be mercurial just as their product strategies have been in order to capitalize on the growth in the gaming market they helped create. Conclusion Pricing's role in the launch.