Sony's answer to MSFT's price cut this holiday season is:

[Bodhesatva]

Kasz216 said:

MontanaHatchet said:

Bodhesatva said:

MontanaHatchet said:

Sony needs to understand that to most consumers, the actual cost of something is far more important than the value.

 

 

No, no, no, no Montana, this is nonsense. Obvious example: if a Toyota Camry were sold for 500 dollars, what would happen? Answer: The Camry would make up 99% market share within weeks. I don't think that's an exaggeration at all.

Value is a perception. Some products (like the Camry) would sell ridiculous amounts at 500 dollars; others would not (let's say, a normal box of Kleenex).

The problem is that most people do not value a Playstation 3 at 500 dollars. Or 400, apparently.

When Sony starts making Camrys, tell me. I thought the mention of Sony (and the topic of this thread) would negate large amounts of counter scenarios, but I suppose not.

 

I think what Bod is doing is working off of the general economist theory that

"Perceived value is the only true value."

Since value is judged by what people will pay for it... the real value of something is it's perceived value.  Which means that two identical products could be worth a different amount value wise just because of the location of the product or brand or whatever.

Which, i must admit does have a logical simple approach to it.

 

 

 Correct. In fact, that's why we have two separate words to approach this with: value and cost. Cost is a literal word, describing the total amount of funds required to create a product. Value is the amount people are actually willing to pay to own this product.

Consider, as another extreme example, a computer that has an internal casing constructed entirely out of diamond. Such a computer would cost hundreds of thousands if not millions of dollars. However, to virtually all consumers, that additional benefit (a Diamond casing they don't even see and provides no benefit) is almost entirely lacking in value. Such a product would never sell, because it's literal cost so greatly exceeds its percieved value by most consumers.

Similarly -- but as a much less extreme example -- there are many things inside the PS3 that clearly cost a lot to produce, but are not nearly as valuable to consumers. It's possible that is Blu Ray. It's possible that it's the graphics processing. Whatever the cause, the PS3's perceived value is lower than its cost. But it isn't because people won't buy things for 500 dollars: people buy 500 dollar PCs all the time, and as stated, people would positively JUMP on a 500 dollar new car. Or a house. Or a 70'' Television. Or even an iPhone, when it was 500 dollars. Because people believed those things were worth 500 dollars worht of value.

Apparently, most people do not believe the PS3 is worth 500 dollars worth of value, despite the fact that it may cost more than that to produce.