Ok by now pretty much everyone understands that the Wii is not going to have a price drop until supply meets demand and stays that way for at least a month or more. The reasons for this are quite obviously because Nintendo has no financial incentive to lower the cost of a product they can't seem to produce fast enough.
With that in mind I have to say it seems like everyone has forgotten the Wii will eventually cut its price. Its almost as if everyone is so caught up in the idea that the Wii is selling out that we have forgotten to look forward and realize it obviously can't last forever. This is especially true for people who believe the Wii could see sales slumps early in '08, but don't address the price cut options Nintendo has available.
So my questions are: Exactly how big of an impact on long term sales will a Wii price drop be? And do you expect the value of the SKU to change as a result of that price drop?
My Thoughts:
On the second question, I don't think Nintendo has any reason to remove Wii Sports when they do drop the price and I can't think of any features they would want to remove, so I will clear that second question up right away and say I think Nintendo can afford to and almost certainly will do a straight price cut without changing the overall value being purchased in any way, except possibly by increasing the Value.
Now onto the much more complex long term sales impact of a price drop. First of all I will say that I am expecting a $50-$70 price drop for their first drop depending on when they eventually do cut price.
Historically looking at other consoles the bulk of their sales are not done at their initial price point but rather at their mid-life price points. And while the Wii may be late to the price cut fun, I do think it will benefit from this trend as we have seen other consoles in its position do in past generations.
Interestingly I think its very likely we could see an uncommon trend in the order of the price cuts. Or to put it simply, we could see a situation where the price is dropped in the EU and/or Japan before it is dropped in the US. This would of course be due to the demand being met at a much better pace in these regions, particularly EU/others. With that in mind, I am not entirely sure that a price cut is as far off as we may have thought. In giving it a second look I think we actually could see an X-mas cut in EU/Others (doubtful) or possibly an early '08 cut in EU/Others (unlikely). I only point out these possibilities because before I had discounted them completely, however now I do feel they are possibilities.
Ideally Nintendo would have production ramped up to "ludicrous speed" (to borrow a phrase from space balls) and would be able to accomadate a new influx of Wii buyers should they choose that path. However, I don't have nearly as good of a grasp on the EU/Others regions as some of our members so I will leave the speculation on what kind of impact a price cut will have there to them.
As for US and Japan, I think a good strategy for Nintendo is to wait and observe the situation. A strategic price cut as an offensive weapons against competitors or as a defensive weapon to keep sales high can be very effective if used properly. In essence the Wii has been performing this well without having to make a lot of moves which leaves them a full arsenal of tricks to use as they move deeper into the generation. This could become important later down the road as they wheel and deal for 3rd party exclusives.
Imagine if you will scheduling a substantial price cut to hit the day of the launch. When attracting a big third party title being able to make these kinds of offers is huge. Imagine Nintendo offering as a promotion a package of the Wii+ Their Game for $270 as an incentive to the developer. There are a lot of promotions you can offer as you are getting ready to cut price that are in effect lowering the cost while increasing the value, basically this creates a price cut that focuses consumers to a chosen product allowing Nintendo ti offer incentives to third parties while building a very strong library.
In conclusion I think price cuts are one of the best tools/weapons each company has and utilizing them at a time of your choosing as opposed to a time dictated by neccessity allows you to generate a lot more impact out of that price drop. This of course means that should Nintendo utilize thier position properly they could greatly increase their final market share for the generation.
PS - Sorry for the length, just had a lot to say =P
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