| SeriousWB said: So you honestly think the amount reduced is the only thing that stimulates demand? >_> Did you know that supermarkets raise prices gradually on certain products, just so they can have a special offer "price reduction" later on which 'does' stimulate demand? The fact that the price has hardly moved does not effect it. A price cut will stimulate demand makingmusic. Do you think that PS3 sales would be in the same position if all prices were kept the same until the time of the second price cut? Or if both prices were cut at the earlier time? No they would not, which is why the price cut issue is brought up. |
Yes a price cut (even if the overall price hasn't changed) does stimulate demand. But it only does so in a minor way. The real value of a price cut is in bringing the price of the product into a new range of affordability and in doing so you are able to tap an entirely new market of consumers who previously didn't see the value in your product stacking up to the price, but now do. That is where the major stimulation to the demand comes from.
You can shuffle the price around all you want in a supermarket but you are talking about a market where people are constantly required to purchase what they have already purchased and will always need to make future purchases of the same items over and over again (ie the items they enjoy eating). The result is that a price shuffling, as you described, in that market can stimulate demand by enticing people to buy early to take advantage of the percieved deal. But since I don't need to purchase a PS3 every couple of weeks to stay stocked up, like I do on say...cans of sweet corn, the stimulation effect is significantly reduced.
Another major difference between the two is that in a supermarket the people who are purchasing food are usually intimately informed about the value of the product and can make an extremely informed decision about whether or not that product is worth the price. With the PS3 the vast majority of potential buyers are certainly uninformed as to the PS3s features and capabilities and very likely are unsure whether or not the value justifies the price.
Now what all of that means is that in a supermarket the consumer is willing to ignore the price shuffling because he knows what product(s) he wants. But also we know that the consumer is going to continue to buy the product whether we give a price cut or not (since they have already purchased it before) and that its unlikely we will get new consumers from a price cut (unless the price is too high currently) since the people who like the product are already buying it. Now with the PS3 the price shuffling just adds confusion to the task of figuring out if the product is worthwhile at its price. But with a price cut we know that we can garner new customers because it is immediately obvious to all consumers that a lower price is a much better value.
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| To Each Man, Responsibility |
