The Concept of Value, or Why Price Cuts Can Fail

[LG[Infinite]]

I never claimed that value and price were totally separate. In one of the paragraphs I outlined the price-cut logic, namely that if the product is valuable but costs too much then lowering the price should increase sales. This logic is perfectly valid when the product is valuable to the consumer, but I argued that the characteristics of the PS3 are not valuable to the consumer.

Nintendo could not sell the Wii for $600 because while it would still be valuable to the consumer its monetary cost would exceed its value. However, if the Wii did originally sell at $600 then subsequently cut that price to $250 then I would argue that its sales would dramatically increase unlike the PS3. It is also worth noting that prices for the Wii on sites like ebay have exceeded those of the PS3 in the past, for instance during the last Christmas period.

Your analogy with the ice cream is not correct. In your analogy you like the taste of vanilla, meaning that you value it, although perhaps not as much as strawberry. In my example, I do not like the taste of vanilla and place no value in it so cutting its price will not produce an effect. This is what the PS3 and Wii battle is currently like. What Sony and Nintendo perceive as being valuable is very different and this is reflected in what services their consoles off. However it is Nintendo's view that best corresponds with the values held by consumers and this is reflected in the console sales.

In the end the consumer will decide and I am waiting to see whether or not Sony does institute a price-cut.